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Rising Ad Spend On YouTube, Search, Shopping Drive Record Q2 Results At Google

It may have taken 16 years, but YouTube is finally growing up, at least in terms of being a viable growth driver for the world’s largest search engine, Google, and its parent company Alphabet.

For the three months ending June 30, the online video sharing and social media platform booked its highest revenues ever, delivering a $7 billion haul that marked an 84 percent increase from a year ago.

“On YouTube, if you look at the engagement across the platform we definitely see a lot of headroom for eCommerce,” CEO Sundar Pichai told investors analysts on the company’s second-quarter earnings call.  “Over the past year, you’ve seen us really focus on accelerating a shift to onboarding merchants across Google so we’ve definitely invested, both in terms of bringing merchants on board, removing barriers, and providing better integration,” he added.

YouTube’s gains were included within a broader set of record Alphabet results that saw total company revenues rise 62 percent to $62 billion with net income that more than doubled. And yet, in many ways, the transformation of YouTube, helped by new initiatives like Shorts (which is Google’s answer to TikTok), was hard to ignore, with company leaders ensuring investors there was plenty more where that came from at a business segment that is oft-derided as being the home of viral cat videos.

“There’s a ton of commercial intent, across YouTube,” Chief Business Officer Philipp Schindler said on the webcast that was broadcast globally on its video platform. Despite its newfound earnings power, he said YouTube has long been used as a shopping and learning destination, be it for unboxing videos, product reviews or makeup tutorials. But now, Schindler said, shoppers are increasingly turning to the platform for ideas and inspiration to help them decide what to buy.

“There are a number of shopping capabilities already underway, and we’re working really hard to make it easier for users to discover and buy directly on YouTube,” he said without providing further details.

Elevated Online Activity

For all its recent gains, YouTube is still a bit player in the larger Google machine, which remains first and foremost an advertising mechanism that accounts for 80 percent of revenues.

“Our strong revenue performance in the second quarter reflects lapping the impact of COVID on our business, elevated consumer online activity, and broad based strength in advertiser spend, as well as the benefits of excellent ongoing execution by our teams,” Chief Financial Officer Ruth Porat told investors.

But Google executives also went to great lengths to explain that this rising tide of eCommerce activity had not only lifted its boat, so to speak but had also raised the income and earnings of thousands of individuals whose livelihoods are made in the company’s network and ecosystem.

“We are proud that our services helped so many businesses and partners,” Pichai said. “This quarter, publisher partners earned more than they ever have from our network and we also paid more to YouTube creators and partners than any quarter in our history,” he added, noting the record rate of traffic it had sent to third-party websites over the past year.

“Through the end of Q2, $120 billion has been earned cumulatively by developers around the world,” he said.

Shopping Is Popping

Google also saw the benefit of its renewed efforts to make online shopping easier to do and online advertising more affordable to pursue. Alongside its long-term investments in artificial intelligence (AI) and cloud computing, the company spent heavily this quarter to upgrade its Graph search results and extend the free listing feature to millions of merchants on Shopify and other platforms.

“[This year] has been about removing integration barriers and now we have partnerships with Shopify, Square, Bigcommerce, GoDaddy, WooCommerce and more,” Schindler said, adding that the programs make it easier for businesses to get started with search, shopping, image queries or YouTube. “Then once merchants are on-boarded, there’s so much more value we can offer them,” he said, pointing to the company’s deep expertise in AI and machine learning.

Although the company gave no formal financial guidance for the current quarter, Pichai opened his remarks with comments about the company’s role in fighting the pandemic at a time when new COVID-19 variants are posing challenges to communities around the world.

“As the pandemic evolves we want to help people get the information they need to keep themselves and their families safe,” Pichai said, “and I really encourage everyone to get the vaccine, when it’s available.”

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