Google Q2 earnings call: YouTube's 'a great business for us'

Google's (NASDAQ:Goog) 2Q net income was up 24 percent to $1.84 billion on revenues that increased to $6.82 billion from $5.52 billion in the same period a year ago as online advertising continued its broad recovery. Still, Wall Street was disappointed in Google's earnings per share--which came in at $6.45 instead of the $6.52 the market had expected--and concerned that growth in search ads, Google's bread and butter, had slowed.

Nonetheless, Google SVP and CFO Patrick Pichette said the growth in the company's display ad network, which includes online video hub YouTube, was growing rapidly, adding that the "scale and quality of our network continues to increase and we see increased demand from traditional brand advertisers."

Pichette said YouTube increasingly was seen by brand advertisers as a must-buy and, while declining to specifically discuss YouTube revenue, he pointed out that the site had garnered Q2 ads from World Cup advertising campaigns for "major advertisers of the likes of Coke, Visa, Nike and Sony."

"We are incredibly pleased by its trajectory," he said. "YouTube is--you take a step back, it's two billion views per day in its fifth year of existence. It's won over a billion monetization videos per week. It's a huge kind of a first page and it's aggregating audiences and you see it today to the top brand advertiser is showing up for it."

"It's a great business for us."

YouTube and Google's display advertising has "allowed us--in the case of large search customers--to complement the portfolio in terms of being able to offer integrated campaigns, which go all the way from branded sites like YouTube to networks like the Google Display Network and to be able to sort of co-mingle lab research," said Nikesh Arora, president of global sales operations and business development. "What's interesting is Procter and Gamble has become one of our larger advertisers this quarter. That's primarily driven by the ability of CBG companies to both see the value of search in their ability to build a brand where they figured out that people research online and... purchase offline; we just call it the ROPO effect. People like P&G are beginning to see that impact. Other consumer companies are beginning to see that impact."

And, Arora said, Google sees YouTube as a young business and believes it's on the path to continued revenue growth.

"We have to now keep getting advertisers to start giving us quality video advertising, which can be put into YouTube," said Arora. Currently, he said, advertisers generally are taking TV ads and using them on YouTube instead of creating online video specifically, which fails to take advantage of YouTube's ability to allow users to interact with the ad and "create some degree of personalization. The ad your grandmother sees and I see and my daughter sees is not necessarily the same ad."

"Both those features, we think, will come into play more and more. ...As we get more inventory clarified for YouTube, we think that it's going to create more and more decisional opportunities."

YouTube's court win over Viacom's copyright infringement allegations also was mentioned during the earnings call, with Pichette saying the case had cost Google some $100 million, an expense and effort, he said, that "was the right thing to do and we did it."

For more:
- see this Seeking Alpha call transcript

Related articles:
YouTube, Google get win in copyright infringement suit... for now
YouTube's 4K support gives indie filmmakers hope
YouTube sees record 14.6 billion video views in May
YouTube front page ads draw top dollar
YouTube hits 2 billion video views a day
Google CEO Schmidt says 2010 is year YouTube turns a profit

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