Google Alphabet yearly revenue growth falls to 35%
The Indian unit of online search engine Google, now rebranded as Alphabet, has reported a 35% increase in yearly revenue. Although the company’s business has doubled over the past two years, the pace of revenue growth has slowed from 2014, when it was 47%.
Analysts said social media and mobile applications diverted some of the advertising traffic that was earlier going to Google, the world’s largest media owner.
Google India posted Rs 4,108 crore of revenue in the year to March 2015, compared with Rs 3,050 crore in fiscal year 2013-14, it said in its annual return filed on Saturday. The company did not disclose profit numbers.
Pointing to rising digital spends, Nitin Mathur, an analyst at Society General, said, “Non-TV spend for HUL (Hindustan Unilever) is now close to 30% of the total advertising budget from low-single digits a few years ago.” But trends are changing, Mathur said. “Spends on several social media apps are taking away share from plain internet advertising, which was controlled by Google to an extent,” he said.
The US technology giant has several internet-related services and products such as cloud computing and other software, but bulk of the revenue is driven by the advertising service that displays ads next to search results. Google India’s managing director for Southeast Asia and India, Rajan Anandan, declined to comment on revenues.
“Google enjoys a certain monopoly with most marketers spending nearly 70% of their digital spends on it. The advantage is that when consumers search Google, they allow the company to build accurate profiles compared to Facebook or Twitter, where people express their opinion which may not necessarily be about themselves,” said Karthik Srinivasan, national lead, Social@ Ogilvy — the social media arm of ad firm Ogilvy & Mather.
In several emerging countries such as India, California-based Google has been working to ensure easier access through a fast-loading, lighter version of its search so users can get answers quickly and pay less for data. The number of mobile search queries in India is second only to that in the US.
Growing user base
At 243.2 million, India had the third highest number of Internet users in the world last year. The pace accelerated over 2015 with a user base of 375 million in October 2015, according to a joint report by Internet & Mobile Association of India (IAMAI), an industry body, and IMRB, a market research agency. The user base is projected to reach 402 million, ahead of the US but behind China, by end of the year.
Companies across segments — from telcos and mobile phone makers to automobile and fast-moving consumer goods companies — have been increasing digital spend to attract younger consumers. The country’s largest advertiser, Hindustan Unilever, spends nearly 10% of its advertising budget on digital media.
However, for Google, this may still not be enough compared with other markets. Even though spending on formats served to internet-connected devices, such as personal computers and mobile devices, is growing in double digits, less than $1 billion will go towards digital ads in India this year.
New York-based research company eMarketer estimates digital to account for 14.2% of total ad spend in India this fiscal, ahead of only Argentina and Indonesia.
But by 2019, when more than a quarter of the ad spend in India will go towards digital, the country will pull ahead of many others, including France, Spain, Italy and Brazil, by this metric. E-commerce firms and consumer startups have done their bit to help Google though several of them are moving away from web-based browsing by launching app-only services.
Experts said the search engine continues to be relevant, which implies customer acquisition cost to Google may not go away, but mobile web apps seem to be a good way to get closer to customers.
“Apps were becoming disruptive for search engines like Google as they can’t crawl or index app content, but with mobile web apps these are no longer concerns. E-commerce firms can now target consumers who do not want to install a native app due to memory constraints or otherwise by providing them with user experience similar to that of an app within a web browser,” wrote Parag Gupta of Morgan Stanley in a report.