Yesterday, Google took the dramatic step of splitting its core business out from its long-term bets like Nest (smart devices), Calico (which is researching human longevity), and Footpath (which is looking to reinvent cities).
So how’s that core business doing? It’s been slowing down for a long time.
This chart from Google’s last earnings report for the quarter ended June 30, 2015, shows two very important metrics. The left-hand chart shows annualized growth rates for cost-per-click, or CPC. That’s the amount advertisers pay each time a user clicks an ad served by Google. That number has been declining year-over-year across the board, and Google blames the shift toward YouTube ads, where prices are lower; some analysts have speculated that the move to mobile is also partly to blame.
The right-hand chart shows annualized growth rate for paid clicks — the total number of times users click on an ad. That number is still increasing on Google’s own sites (yellow line), but decreasing across partner sites (green line). Still, Q2 showed a nice uptick in paid click growth, which helped the stock jump more than 10%.
The big picture? Google’s core business generates tons of cash, but Sundar Pichai and his team need to find smart ways to keep growth cranking until one of the other Alphabet projects takes off.
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