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Can programmatic gains assuage Wall Street fears over Google’s mobile transition?

Google made its first quarterly earnings call since the Alphabet overhaul this week, posting the usual quarterly increase, and profit, but questions from analysts focused on how it would monetise consumers’ shift to mobile internet consumption.

The internet advertising giant reported total revenues of $17.7bn for the quarter ending 30 September, noting “substantial growth” in its mobile search advertising business, but also disclosed the its average CPC was down 11 per cent year on year.

With Google CEO Sundar Pichai making his debut in front of analysts in the aftermath of the initial earnings release, Wall Street analysts focused on the mobile versus desktop monetisation gap.

“Mobile gives us unique opportunities, but it will take some time to get there…. My long-term view is that is can pose better opportunities compared to desktop, but it’s going to take us some time to get there,” he said.

However, the line of questioning from analysts continued along the lines of: ‘when will mobile clicks surpass 50 per cent; i,e. when will mobile ad revenues follow suit?

Firstly, let’s take stock of Google’s performance. With a double-digit revenue growth for the quarter, it’s hardly in danger of being victim of a bear market (where investors hammer its stock price).

The fact that its stock price increased as much as 9 per cent in the immediate aftermath of the disclosure reflects this, in Wall Street terminology its overall performance was “a beat”.

However Google is a standard bearer for the internet advertising sector, hence the intense amount of scrutiny it receives - fair or not. Hence it was interesting to see how Pichai was keen to point out the improved performance of it programmatic (and video) offering to advertisers. Perhaps he sees this as key to pleasing those that will decide the company's stock price? 

“The number of advertisers using our programmatic solutions has nearly doubled in the last year and a half, and now includes over 80 per cent of Ad Age’s top 100 advertisers,” said Pichai.   

“Additionally, the number of mobile and video impressions served DoubleClick’s Bid Manager have grown more than 3.5x since last year.”  

However, just how likely is the increasing reliance on programmatic advertising, or ad tech, to assuage both Wall Street concerns? For investors have been tough on ‘pure-play’ ad tech companies that have listed publicly in recent months.

The reason(s)? Queries over whether or not these companies offer differentiated technology offerings is at the core, but a key reason has been questions over transparency, primarily with growing questions around issues such as: ad blocking; click fraud, and viewability.   

As The Drum reported earlier this week, advertisers are undoubtedly keen to embrace the efficiencies offered by ad tech, but increasingly, they are asking questions around the models.

These concerns from advertisers - crystalised this week's revelation that the ANA has selected K2 and Ebiquity/Firm Decisions to lead an investigation into media transparency over rebates - are likely to likely to be echoed by Wall Street.

Key to assuaging these concerns will be the establishment of industry standard metrics on issues such as measurement, and approaches to routing out unethical players in the online advertising space.

This leads me to believe that a growing reliance on programmatic brings more pressure on the leading internet advertising companies such as Google to lead such initiatives, and align the wider industry’s approach. As reported in this title, current approaches are woefully disparate. 

Undoubtedly, Google would be eager to lead this trend, but as one of the industry’s ‘walled garden’ players, just how likely are the other constituent players to follow any lead it attempts to take? Perhaps Wall Street will be the outside force needed to nudge Google (an the other ad tech players into a harmoised approach to routing out the ills of programmatic?   

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