Google is grabbing more and more ad revenue from partners

Key Points
  • Ad revenue from Google's own properties rose more than twice as fast as sales on partner sites
  • Sales rose more than twice as fast on its services
  • Such sales now comprise 81% of total ad sales, up from 71% a year earlier
Google has to respond to brand safety challenge: WPP CEO
Google has to respond to brand safety challenge: WPP CEO

Google's own Internet services grabbed an increasing share of digital advertising away from the partner sites that use its technology in the first quarter, yet another sign the Internet giant is extending its dominance over all online ad rivals other than Facebook.

The company said first quarter ad sales on its properties rose 21 percent during the period, while those on its partners' sites climbed just 8.6 percent.

Google's own sales now comprise 81 percent of the ad revenue derived from its online network, at $17.4 billion, up from 71 percent a year ago.

Total ad sales from all sources rose almost 19 percent to $21.4 billion.

"The increase in (Google) sites revenue reflects healthy growth in mobile search," Alphabet CFO Ruth Porat said on a conference call with analysts late Thursday.

Google has been updating the algorithm it uses to display search results to weed out sites marked by fake news, malware and other unsavory content.

It's also been dropping in its rankings mobile sites whose pages are unstable or take a long time to load on consumer's smartphones.

While the changes have been made in part to improve the Internet experience of online consumers, they're also benefitting the company's business.

Instinet analyst: A little more pressure on Google versus Amazon
Instinet analyst: A little more pressure on Google versus Amazon

Alphabet reported first quarter revenue and earnings that topped Wall Street estimates, with sales rising 22 percent from a year ago to $24.75 billion.

Its shares rose as much as 4 percent in after-hours trading.

"The growth for the size of the company is actually pretty amazing," Denny Fish, a portfolio manager at Janus, told CNBC after the results were released.

The revenue gains were driven by a surge in activity on Google services, including its search page and services ranging from Gmail to YouTube.

The company said the number of paid clicks on its properties rose a whopping 53 percent year-over-year, while the rise on its partners' sites was a small fraction of that, at 10 percent.

The total number of clicks rose 44 percent.

Meanwhile, the cost-per-click on Google sites fell 21 percent as the company gets ever more efficient in providing results for advertisers.

At the same time, its YouTube property has been garnering an increasing share of video ad dollars.