Google Saw Q2 Gains in Display Ad Business

Google’s display ad business fared well in the second quarter, as the company tested new creative formats and monetized a larger number of YouTube videos.

That lift, along with improvements in ad quality and growth in aggregate clicks, helped propel Q2 revenue growth of 3 percent to $5.5 billion. Net income rose 18 percent to $1.5 billion.

“Strides in ad quality and sales drove healthy revenue growth despite the tough economic environment,” said CEO Eric Schmidt, who added, “YouTube is now on a trajectory we’re very pleased with.”

Finance industry ad spending remained weak during the period, but other sectors showed improvement, execs said. They cited travel and retail shopping as areas of improved spending. Even so, Google CFO Patrick Pichette warned investors that Q3 is typically weak, so the current quarter could see spending flatten once again.

Local, product shopping, and video advertising are among the areas where Google’s experiments with new ad formats have begun to pay off. On YouTube, the company is now monetizing “billions” of videos per month and selling more ads on its homepage and against premium content, according to Nikesh Arora, president of global sales operations.

“We are seeing significant sell-through in most of our major markets,” Arora said of the YouTube homepage. “The reason we’re excited is we’ve finally got the selling in place…. We’re also getting excited about pre-roll. We can shift more views toward pre-roll content, which allows us to create more inventory.”

Aggregate paid clicks, the number of total clicks on ads on Google’s sites and in its partner network, rose 15 percent year-over-year and were down 2 percent sequentially since last quarter. Meanwhile average cost-per-click fell 13 percent over the second quarter of 2008 and grew 5 percent sequentially, Google said.