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Alphabet’s Revenue Jump Underscores Fervor Around Mobile and Online Video

October 27, 2016

Sundar Pichai, Google's senior  vice president of products,  speaks during a presentation at the Mobile World Congress in BarcelonaSundar Pichai, Google's senior  vice president of products,  speaks during a presentation at the Mobile World Congress in Barcelona
Sundar Pichai, then Google's senior vice president of products and now its CEO, at the 2015 Mobile World Congress in Barcelona, Spain.Albert Gea/Reuters

Google parent Alphabet reported a 20.2% rise in quarterly revenue on Thursday, helped by robust sales of advertising on mobile devices and YouTube, and the search giant said it would repurchase about $7 billion of its Class C stock.

Alphabet, along with Facebook (FB), dominates the fast-growing mobile advertising market.

Shares of Alphabet (GOOGL), the world’s No. 2 company by market value, were up 1.6% in after-hours trading.

Google’s ad revenue rose 18.1% to $19.82 billion in the third quarter, accounting for 89.1 percent of Google’s total revenue, compared with 89.8 percent of revenue in the second quarter.

Paid clicks rose 33%, compared with a rise of 29% in the second quarter. Paid clicks are those ads on which an advertiser pays only if a user clicks on them.

Cost-per-click, or the average amount advertisers pay Google, fell 11% in the latest period after dropping 7% in the second quarter.

Analysts on average had expected a decline of 7.9%, according to FactSet StreetAccount.

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Per-click costs have been falling as people shift to mobile devices from desktops. Because of the limited space, advertising on mobile devices is generally cheaper.

Research firm eMarketer has estimated that Google will capture $52.88 billion in search ad revenue in 2016, or 56.9% of the global market.

Google’s Other Revenue, which includes the company’s increasingly important cloud business, jumped 38.8% after rising 33% in the second quarter.

The cloud business competes with services offered by market-leader (AMZN), Microsoft (MSFT), and IBM (IBM).

Alphabet’s Other Bets generated revenue of $197 million, but reported an operating loss of $865 million. In the year earlier period, revenue was $141 million and the loss was $980 million.

Other Bets includes broadband business Google Fiber, home automation products Nest, self-driving cars as well as X, the company’s research facility that works on “moon shot” ventures.

The company’s consolidated revenue rose to $22.45 billion in the three months to Sept. 30 from $18.68 billion a year earlier.

Net income rose to $5.06 billion, or $7.25 per Class A and B share and Class C capital stock, from $3.98 billion, or $5.73 per share, a year earlier.

Excluding one-time items, Alphabet earned $9.06 per share.

Up to Thursday’s close of $817.35, Alphabet’s shares had risen 5.1% since the start of the year.