Google Q3 beats earnings view, paid clicks up 47% YoY

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Contents

Google Q3 beats earnings view, paid clicks up 47% YoY

On October 26, Alphabet Inc. (NASDAQ: GOOG), the parent company of Google, reported its fiscal 2020 third-quarter results that crushed analysts estimate. Following the results, the stock hit a new all time high of $1048.39.

However, the stock has receded to $1020 levels in the past few trading sessions. A deeper-than- anticipated decline in the amount paid by advertisers (Cost Per Click) and an increase in the traffic acquisition costs (TAC) is the main reason for the slight correction in the share price. Still, considering the stupendous quarterly results and a higher than anticipated aggregate-paid- clicks data, we anticipate the rally to resume soon. The stock of Google closed at $1025.90 on Monday.

The company, which owns YouTube, reported Q3 2020 net income of $6.732 billion, or $9.57 per share, on revenues of $27.772 billion. A year before, the company recorded a net income of $5.061 billion, or $7.25 per share, on revenues of $22.451 billion. The Wall Street Consensus called for earnings of $8.33 per share on revenues of $27.20 billion.

Google

Segment wise, advertising revenues increased about $4.20 billion y-o-y to $24.005 billion in Q3 2020. Other revenues, which includes hardware sales, jumped to $3.405 billion in the recent quarter, from $2.433 billion in the similar period last year. The hardware division launched Pixel 2 mobile phone earlier this year and is preparing to launch Google Home and Google ear buds. The company has also entered into an agreement with HTC to acquire its mobile division for $1.10 billion. Alphabet’s other bets include Self-driving cars under the banner Waymo, Verily life sciences research, start-up investing arm, and Nest smart-home devices. That division generated revenues of $302 million in the third-quarter and exceeded Street Account estimates of $263.40 million. The other bets division generates revenue through Fiber internet sales, Verily licensing, and Nest products.

Aggregate CPC declined 18% on a y-o-y basis in the third-quarter, but increased 1% from the previous quarter. Traffic acquisition costs increased to $5.502 billion in July-September quarter 2020, from $4.182 billion in the same period last year, and missed Street Account estimates of $5.24 billion. However, aggregate paid clicks jumped 47% from last year’s similar quarter and topped Street Account estimate of 46.1% growth.

Alphabet ended September quarter with cash, cash equivalents, and marketable securities of $100.143 billion, up from $86.333 billion in the prior-year’s similar quarter. Thus, robust earnings, improvement in aggregate paid clicks, and growth in other revenues is expected to keep Google bullish in the short-term. The stock is trading above a major support level of 1013. Further, the underlying bullishness in the stock is indicated by the ascending momentum indicator. The MACD indicator is also moving above the zero level. Thus, we can expect the stock to reach the next probable resistance level of 1112.

We may invest in a call option to capitalize on the probable uptrend. The option will be bought when the stock trades near $1025 in the NASDAQ. Further, the contract should be valid for a week.

Google Q3 beats earnings view, paid clicks up 47% YoY

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Advertising Insights and Learnings from the Cyber Five Across Google, Facebook, and Amazon

This article was co-authored by Andy Taylor, Tara Johnson & Greg Swan at Tinuiti

Move over InstaPot – this year’s top-selling items on Black Friday and Cyber Week included Keurig coffee makers, Oral-B electric toothbrushes, Champion fleece hoodies, Nintendo Switch, Samsung TVs, Apple laptops, LOL Surprise dolls, and (no surprise here) Amazon devices such as the Echo Dot and the Fire TV stick.

According to Adobe Analytics, Cyber Monday Shoppers spent a record $9.4 billion online, up 19.7% from a year ago. The period between Thanksgiving and Cyber Weekend also saw strong growth for many businesses:

  • Retailers with more than $1 billion in annual revenue saw online sales jump 540% compared to an average day.
  • Smaller retailers with less than $50 million in yearly sales also benefited from the shopping holiday, seeing a 337% increase.

The same was certainly true for advertising programs across the major digital platforms as many consumers went online to get their holiday shopping underway.

Here we’ve assembled some of the high-level insights we at Tinuiti observed studying advertiser performance this year across Amazon, Google, Facebook and Instagram during the Black Friday & Cyber Monday weekend.

Jump to a section below:

Tinuiti’s 2020 Cyber Five Data & Analysis

Tinuiti’s 2020 Cyber Five Data & Analysis

Amazon Sponsored Products Spend Grows 50% Year over Year and Sponsored Brands Clicks Soar

Sponsored Products advertisers increased investment in the format 50% year over year for the period between Thanksgiving and Cyber Monday, often referred to as the Cyber Five. The increase was driven by a 29% increase in clicks and a 16% increase in CPC. Sponsored Brands spend grew 26% with a whopping 52% increase in clicks accompanied by a 17% decline in CPC. Sponsored Brands accounted for 15% as much spend as Sponsored Products for the median advertiser targeting both formats.

While conversions and sales attributed to ad clicks on these days will grow over time as latent orders come in for longer conversion windows, the early results are strong on that front as well. Sponsored Products sales attributed to ad clicks that occurred within 24 hours of the purchase grew 31% Y/Y for the Cyber Five.

Sponsored Brands sales, which can only be viewed using a 14-day conversion window, grew 54% over the same time frame despite sales figures from last year being fully populated with fourteen days’ worth of attributed conversions, meaning this growth figure will go up over the coming days. That said, the vast majority of attributed sales do occur within 24 hours of the ad click for most advertisers.

70% of conversions and 71% of sales attributed to Sponsored Brands between Thanksgiving and Cyber Monday were deemed new-to-brand in that the customer had not purchased from the brand on Amazon in the last twelve months. New-to-brand metrics were rolled out in January 2020, making this the first holiday season that advertisers are able to use these metrics in determining the incremental value of Sponsored Brands.

Amazon’s Presence in Google Shopping Remains Strong

Evaluating Amazon’s presence in Google Shopping ads against advertisers that sell products in a variety of product categories from home goods to apparel to sporting goods, Amazon appears to have held roughly steady between Black Friday and Cyber Monday relative to early November following a modest dip on Thanksgiving Day.

By comparison, the retailers studied saw a modest bump in impression share from Wednesday to Thanksgiving Day, indicating Amazon may have been a bit less aggressive on the holiday itself compared to other advertisers but ramped back to normal levels over the weekend.

Amazon is much more prevalent this year than last year, and Black Friday had an impression share 87% higher than it did Black Friday 2020 for the median advertiser studied. Despite the increased competition, non-Amazon advertisers were still able to grow Shopping investment 32% year over year for the period between Thanksgiving and Cyber Monday.

Strong Growth for Google Shopping and Text Ads Between Thanksgiving and Cyber Monday

During the Cyber Five, Google text ad spend grew 25% Y/Y driven by an identical increase in clicks as CPC held steady. Shopping grew even faster, with a 32% increase in spend driven by a 31% increase in clicks. While CPC was essentially flat overall for both formats, the cost of desktop traffic was up 18% and 11% for Shopping and text ads, respectively.

Spend on tablets declined 23% for text ads and 38% for Shopping year over year, with clicks declining at least 20% for both formats. Data from StatCounter shows tablet market share at a 13-month low in November 2020, as the usage of these devices continues to decline over time.

Thanksgiving Day Glitches Don’t Get in the Way of Advertisers Increasing Spend on Facebook Properties

Facebook experienced issues across its properties on Thanksgiving Day which prevented many users from accessing Facebook and Instagram for periods throughout the day. However, advertisers increased spend 27% on Facebook and 54% on Instagram year over year on Thanksgiving, with impressions also up significantly.

Facebook Mobile Share Rises as Users Travel for the Holidays

With social media users traveling and/or away from work computers on Thanksgiving, mobile spend share for Facebook spiked much like it has in past years.

This year, mobile devices accounted for 92% of all spend on Thanksgiving Day, the highest share of any day since the start of November. Mobile spend share remained elevated on Friday relative to other Fridays in the month, but was back to typical levels relative to average day of week trends from Saturday through Cyber Monday.

Instagram Key for Social Advertisers Throughout the Holiday Weekend

Between Thanksgiving and Black Friday, Instagram accounted for 32% of all spend across Facebook properties, compared to just 22% for the same period last year, as Instagram growth continues to far outpace that of Facebook proper.

Instagram Stories has been a meaningful part of that growth, and over the course of the Cyber Five accounted for 38% of Instagram spend compared to 12% for the same period last year.

We spoke with our Amazon Team at Tinuiti to get their take on big wins and stand out trends over the holiday weekend:

1. Amazon DSP ASIN Retargeting Takes Home Big Wins For Brands

Having a sophisticated advertising approach this year is critical to capitalize on the biggest shopping days of the year. In particular, we saw an enormous amount of success with Amazon DSP ASIN retargeting.

One of the major perks of DSP advertising is the ability to leverage Amazon customer data to serve ads to past purchases and other shoppers likely to purchase your product(s) on Amazon-owned network sites.

We saw a significant jump in ROAS for Amazon DSP retargeting campaigns on Black Friday and Cyber Monday:

“I have a client relatively new to DSP that had an awesome day on Black Friday with a 21.59:1 ROAS. This was more than double the lifetime ROAS of 9.16 and they’ve only been live for about a month. We saw really good results early on with a lot of our Amazon Search campaigns so we increased our budgets in DSP and added another ASIN to retarget. We knew traffic was going to increase during this time of year, therefore, increasing our retargeting pool of customers.

“Increasing our DSP budget and advertising an additional listing, coupled with strategic coupons and promotions allowed us to capture the increased Black Friday traffic and direct it to a detail page that was much more likely to convert. Cyber Monday ROAS was even higher than Black Friday, hitting a 29.50.”

– David Cooley, Sr. Marketplace Channel Analyst at Tinuiti

2. Extended Deals Paired With Deep Discounts Drive Sales

Today, customers expect more long-term deals. Customer expectations are no longer hyped around gimmicky one-day sales. Customers expect deals & savings to be extended beyond the one-day shopping holidays of past years.

“Just like Prime Day turning into Prime Day Week – Black Friday was extended into Black Friday Week with a lot of deals started the Monday prior to Thanksgiving and running throughout Cyber week. We use to see a bit of a lull leading up to Black Friday, but because it’s actually expanded to an entire Black Friday week and continuing into Cyber week a lot of these deals are spilling over.”

– Pat Petriello, Director, Amazon Strategy at Tinuiti

For brands willing to run discounts for a longer period of time, the payoff was huge this year:

“A surveillance gear brand we work with ran a 7-day deal on one of their top-selling ASINs and sold around 1,100 units on Cyber Monday. After Cyber Monday, they supported the traffic to Amazon with external emails blasts to their database off Amazon to maintain sales velocity. Prime Day learning showed us that the deepest discounts drove the most volume when next to products only offering 10% off or less so we offered over 50% off and it was a great success.”

– Casey Flynn, Marketplace Search Specialist at Tinuiti

3. Inventory issues continue to damage sales

We see it every year – sellers hurt by inventory stockouts.

“If I were head of marketing for a brand, inventory preparation would be something that I would invest a tremendous amount of energy into. The truth is, even if you do all your advertising efforts upfront including Enhance Brand Content, building out a granular list of keywords, and running FBA – if you stock out on high volume shopping days you have essentially devalued all of your investment. I would view this as an area that a lot of businesses still get wrong.”

– Pat Petriello, Director, Amazon Strategy at Tinuiti

What a lot of sellers and vendors don’t realize is that although they are operating through FBA, Amazon, in general, can take a lot longer to process your inventory (compared to say Target) because you may have to individually label all of your items.

So even as a vendor if you hit a huge spike (in Product Orders) and it’s bigger than expected on a busy shopping day, you might stock out and not be able to get those shipments into FBA quickly enough to satisfy demand.

4. Increased Competition On & Off Amazon

Without a doubt, we’ve seen an increase in competition on and off Amazon. The Amazon ad landscape itself is more competitive YoY. Generating the same sales as 2020 – now requires sophisticated advertising strategies (to get the same results or better) in 2020.

“You also have to consider competitors. Now that Walmart, Target, and Best Buy are all extending their sales they are also offering deep discounts and Amazon wants to match (or better those offers). For brands, you have to consider at what point are you discounting products so much that you actually run into inventory control issues. Overall the point is to not think about each of these channels in a silo, rather take a look at how each impacts your brand throughout the holiday period.”

– Pat Petriello, Director, Amazon Strategy at Tinuiti

5. Spotlight Deals Dominate

Spotlight Deals are a single item or small set of closely related items discounted for one day only.

Products that are featured in Amazon’s “Deal” space (especially on Amazon Prime Day, Black Friday, & Cyber Monday) typically enjoy a bump in sales throughout the duration of the deal.

This year was no different.

“A kitchen cookware set featured as the “Spotlight Deal” led to an extreme jump in units ordered on Black Friday. We launched the new product at midnight (it was featured as a Spotlight deal at 11am) and generated more than +$250k in Orders in Revenue.”

– Jeff Banks, Senior Marketplace Channel Analyst at Tinuiti

6. Leveraging Retargeting Efforts & Expanding Visibility in Q1

Q4 is essentially a springboard for 2020. In many ways, your holiday advertising strategy will feed into your Prime Day success and so on and so on.

A common misconception we see among sellers is the desire to prematurely dial back their advertising budgets in January, but Q1 represents an enormous opportunity for revenue due to returns, gift cards, and cash in hand.

We expect a big apparel push in January, building off of the ‘new year, new you”‘ campaigns.

“January is actually one of the biggest months out of the year (outside of December and July) on Amazon, especially for select categories like sports and nutrition. Brands need to know that Q1 is still a really important time to stay visible to shoppers. Even for the categories that may not peak in January – it’s still going to be a pretty big month for sales.”

– Jeff Coleman, VP, Marketplace Channels at Tinuiti

Pro-Tip: In general, apparel has a high instance of returns due to the wrong size, color or fit so we expect there will be an influx of shoppers either returning items in exchange for something else or shopping for themselves.

We spoke with our Google Shopping Team at Tinuiti to get their take on big wins over the weekend:

Google Shopping

1. Coffee system manufacturer raises revenue by 840% YoY with an 18% increase in investment

“We developed a campaign strategy that allowed us to capitalize on driving revenue from brewer sales throughout the holidays, rather than the typical beverage focus. This strategy allowed for simple budget shifts from beverages to brewers to match demand depending on the time of year and available website promotions. We also implemented a combination of bidding strategies this year (tROAS & Maximize Clicks) which helped scale the campaigns quickly to efficiently drive revenue through the peak of the holidays.”

– Nicole Ciccone, Senior Specialist, Shopping & Feed at Tinuiti

2. Women’s Apparel Retailer Raises Revenue By 78% YoY While Improving ROAS

“Through efficient campaign segmentation, an expansive showcase campaign strategy, & the addition of new channels, we were able to accomplish those goals. On Black Friday we saw a 49% increase in clicks at a 17% lower average CPC.”

“Revenue was up 78% bringing our overall ROAS to 1.83. Cyber Monday proved to be even more efficient with a 68% decrease in costs and a 74% increase in Revenue. For the entire weekend, revenue was up 95% & costs were down by 16% compared to last year — while raising our ROAS above 2.”

– James Wallace, Shopping & Feed Strategist at Tinuiti

3. Plus-size Women’s Apparel Retailer Increases Non-branded Traffic Revenue By 142%

“A new granular product group structure and category level tROAS automated bidding portfolios allowed us to drive 124% more traffic and 142% more revenue from non-branded sources YoY during Cyber Week by getting more aggressive on high volume categories knowing that higher CPCs would be mitigated by higher CVRs.”

“Newly restructured Showcase shopping campaigns helped drive new user mobile traffic in 2020 (not running Showcase LY) at a higher ROAS, slightly stronger than overall standard non-branded shopping campaigns. Non-branded Shopping spend on Cyber week was 173% higher YoY, driving 135% more orders and 142% more revenue from non-branded revenue.”

– Dan Croop, Strategist, Shopping & Feed at Tinuiti

4. Women’s Casual Apparel and Accessories Brand Raises Revenue 47% YoY

“Our team drove success this year by planning a flighted budget to maximize expected high CVR days. Early sales in the month helped front-load revenue when competition is less fierce and CPCs are lower. In addition, fluidity in budgeting between channels allowed the team to make “game-day” decisions, funding efficient tactics where demand was higher than expected, like Shopping Ads.”

– Alison Nguyen, Senior Specialist, Shopping & Feed at Tinuiti

1. Footwear Retailer Has Best Black Friday Ever; Raises ROAS By 127% YoY & Decreases CPCs By 30%

“We saw huge success with this account by implementing a strategy to improve quality score in addition to making budgeting and seasonality adjustments. This enabled the brand to show more relevant ads to their audience, which decreased CPCs and boosted return on investment across the board.”

“We also tested Google’s eCPC strategy that enabled us to optimize for conversion value rather than just conversions themselves. Uncapped budgets enabled us to control our space on the SERP. We also launched custom ads for each ad group theme weeks in advance so they could gain momentum leading up to the major shopping events.”

– Ashley Brock, Senior Specialist, Paid Search at Tinuiti

2. Specialty Knitting & Crochet Retailer Grows Revenue 20% YoY

“This BF/CM promotional weekend we saw a 20% increase in revenue, with only an 8% increase in ad spend YoY. Our secret sauce was doing a lot of pre-planning and forecasting. With Cyber Monday now in December, we knew shoppers would start planning for gift giving earlier than previous years.”

“We launched our holiday focused campaigns earlier than usual. We wanted to get click traffic for “gift idea” shoppers early so that we could re-engage them during BF/CM with conversion-focused campaigns that included free shipping.”

“By starting early we easily dominated the SERP with 96% impression share over the weekend. We partnered this strategy with the seasonality bid adjustment on our tROAS automated bid strategy and scaled CVR. We opened up budget caps, re-engaged gift shoppers with relevant copy, and started holiday campaigns early to keep our momentum going strong.”

– Bethany Bauer, Senior Paid Search Specialist & Account Manager at Tinuiti

1. Women’s Plus-size Clothing and Accessories Retailer Crushes Acquisition Goals By 40%

“We were able to exceed their Black Friday acquisition goals on paid social by collaborating on a creative launch strategy that balanced introducing the brand to new customers and communicating the limited-time promotion. Across all channels, we implemented 3x/day check-ins with the client to ensure that we could pivot strategies as needed to maximize efficiencies.”

– Kelsey Miller, Paid Social Strategist at Tinuiti

2. Women’s Apparel Chain Beats Revenue Expectations; Has Biggest Digital Day Ever

“We saw major success by planning and forecasting earlier this year. Across Paid Social, we modeled past conversion rates and projected auction costs to calculate ideal daily spends each day 11/28-12/2. We collaborated with the client creative team on a weekly basis in November to ensure all holiday creative followed Facebook, Snapchat, and Pinterest best practices. Finally, we worked with their creative strategists in building out newer ad types such as store traffic ads and dynamic collection units.”

– Kelsey Miller, Paid Social Strategist at Tinuiti

3. Fitness Company Increases Conversions By 53% While Reducing Costs By 13% YoY

“We leveraged Facebook’s campaign budget optimization at the prospecting level to allocate spend to the most efficient creative and at the retargeting level, to allocate between feed & story placements. For prospecting, we focused on a broad targeting strategy to reach the most users at the most efficient front end costs using a combination of static, video, and gif assets.”

“We then segmented our retargeting pools to increase scale against the most recent visitors. Overall, we were able to scale spend up 109% versus 2020, and drive 103% more conversions with a 12.5% improvement in CPAs.”

– Eli Ruben, Account Specialist, Paid Social at Tinuiti

4. Shopping Mall-based Apparel Retailer Boosts Revenue By 271% and ROI by 261% YoY

“Our paid social strategists worked closely with this brand to prioritize testing and audience development in Q3. Early efforts gave us the necessary insights and learnings to execute a sure-fire creative and targeting strategy at scale during Cyber Week which resulted in a 261% increase in ROI comping last year’s revenue by 271%.”

– Suzie Chudzik, Sr. Specialist, Paid Social at Tinuiti

5. Surf Apparel Brand Achieves 86% YoY Sitewide Revenue Growth Through New User Acquisition

“With a heavy emphasis on prospecting toward net new users through interest-based and lookalike audiences, we were able to build a sizable remarketing pool that we could tap into during Cyber Week. We saw excellent performance by staying in front of our target audience with highly relevant promotions. “

Our goal was to significantly grow our reach while keeping our conversion rate efficient which helped us drive YoY revenue growth. It is also worth mentioning that an emphasis on campaign consolidation per initiative (i.e. retargeting, prospecting, etc) helped to give FB as much data possible to optimize from.”

-Stephan Messana, Growth Strategist at Tinuiti

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