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‘Deep relationships’ and ‘machine learning investments’ help Google weather the brand safety storm as it posts strong Q1 revenues

Sundar Pichai, Google CEO, says as machine learning begins to improve, so will its ability to better enforce brand safety / Alphabet

The opening quarter of 2017 was one Google’s most turbulent when it comes to its relationships with advertisers, given the brand safety outcry, but it appears to have little material impact, with the online advertising giant’s parent company Alphabet posting a 22% revenue jump hitting $24.75bn.

Google-owner Alphabet today (April 27) released details about its revenues for the first three months of 2017, with Sundar Pichai, Google’s chief executive officer, noting to investment analysts how “deep relationships” and investments in “machine learning” helped it evade the full wrath of advertiser fury over their ads being served against controversial content on the web giant’s properties.

In a statement released with the numbers, Ruth Porat, chief financial officer of Alphabet, said: “We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet.”

Alphabet also used this quarter’s filing to break out its spend by geography, showing that US revenues were up 25% year-over-year to $11.8bn and APAC revenues hit $3.6bn during the quarter, up 29% year-over-year.

Revenues for the UK (where the brand safety fury erupted after an investigation by News Corp-owned The Times of London) landed at $2bn, compared to $1.9bn 12 months beforehand (an increase of 5% year-over year) giving something of an insight into the material impact the furor, which saw a number of tier-one brands suspend buying media from Google.

Porat did note, however, how the continued weakness of British sterling post-Brexit did have an impact on the metrics.

The markets reacted positively to the numbers upon their initial release, with Alphabet’s stock trading at an average of 4% higher than its price on an average Thursday after the performance figures for the quarter were disclosed.

Interestingly, the release also contained details of how the period saw Alphabet revise Google's "monetization metrics" resulting in a mere 1% sequential increase to the recorded number of paid clicks on Google-owned properties, plus a 4% decrease in its average cost-per-click (see chart below).

Google revenues were $24.5bn, up 22% year-over-year, with $24.1bn coming from advertising revenues, with Porat noting how the move to mobile search (in terms of both users and advertisers), YouTube, and programmatic media buying contributed strongly to this number.

“Although it continues to be negatively impacted by the ongoing shift by advertisers to programmatic, and our ongoing policy efforts,” added Porat, commenting on its Google network revenues.

'Deep relationships' helped

However, it was on the company’s subsequent earnings call where its leadership faced questions from investment analysts, where Pichai said the company was “really transitioning to becoming an AI-first company,” and attempted to assure listeners that it had the brand safety issue at hand.

One analyst made queries regarding Google’s “softer efforts” to assure tier-one brand advertisers that its platforms were safe to purchase media on, with Picahi noting how his account management and product development team has “literally made thousands and thousands of calls” to assuage such concerns.

“The depth of relationships we have with advertisers was very evident as we went through this over the past few weeks,” he added. “That deep relationship has enabled us to respond thoughtfully and the feedback has been very positive and constructive.”

'As machine learning gets better, we'll get better'

Picahi went on to describe how Google’s investments in machine learning were “a great example” of how it was looking to better enforce its content approval policy, as well as the sophistication of its ad serving capabilities.

“As machine learning gets better, we’ll be able to do this better,” he noted.

Pichai then went on to highlight how Google has been “actively engaged with clients” around its remuneration policies for YouTube content creators, as well as brand safety control tools, hinting at a policy update announcement at the YouTube BrandCast event next week, featuring as part of this year’s UpFronts.

“As marketers continue to shift towards programmatic ad buying, we’ve been focused on making our DoubleClick platform easy for them [to use] to reach the right audiences. We’ve been focused on making more inventory available to more advertisers, especially with premium inventory,” added Pichai.

“Brands love the reach and engagement that they get across YouTube and the effectiveness of formats like TrueView Skippable ads,” he said.

“Our cornerstone effort is Google Preferred, which allows brands to advertise against the top 5% of our content. We also announced new safeguards for advertisers through a combination of updates to our policies and enforcement, and new default settings around where ads can appear, including improved controls for advertisers.”

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