Google beats ad growth expectations across search, YouTube, and Network

The news: Google parent company Alphabet reported 62% year-over-year (YoY) revenue increase in Q2 2021, including rapid growth to all three main segments of its ad business:

• Search. Google reported an increase of 68% in revenues for Google search and “other” on-property ads, to $38.85 billion. This was significantly faster growth than we anticipated for the quarter. Search is still by far the largest segment of Google’s ad business. On the earnings call, Alphabet CFO Ruth Porat reported that growth in search ad spending was broad-based but particularly propelled by retail ad spending.
• YouTube. Revenues for YouTube ads were up by a whopping 84% to just over $7 billion—another beat compared with our expectations. Brand advertising has remained dominant on YouTube, though its performance business has grown over the past couple years. Porat noted the increase to YouTube revenues in Q2 was largely attributable to brand advertisers.
• Google Network. Google’s off-property offering grew revenues by more than 60% in Q2, remaining larger than YouTube at $7.6 billion. Again, this growth was much higher than our expectations, indicating that not only is Google doing well in terms of ad revenues, but the rest of the programmatic web is also enjoying continued rapid growth YoY.

More on this: In May, we predicted that US programmatic digital display ad spending would rise by 29.0% this year. Programmatic ad firms including The Trade Desk, Viant, and Pubmatic will report earnings in August.

What’s next:

• Google’s earnings reports for both Q1 and Q2 beat our expectations substantially. Back in March, we estimated that Google would grow its worldwide net ad revenues by 25.3% this year and that US net ad revenues would increase by 24.7%.
• Based on yesterday’s earnings, we anticipate making another upward revision to our outlook for Google’s ad revenues as part of our US digital ad spending forecast update this fall.