Home Advertizing services Alphabet achieves record profit thanks to wave of Google ads

Alphabet achieves record profit thanks to wave of Google ads


Alphabet Inc’s Google brand logo can be seen outside its office in Beijing, China on August 8, 2018. Photo taken with a fisheye lens. REUTERS / Thomas Peter / File photo / File photo

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October 26 (Reuters) – Google owner Alphabet Inc (GOOGL.O) reported higher than expected third-quarter ad sales on Tuesday, a sign that the company is overcoming new limits in mobile user tracking and that online shopping is more popular than ever. in the holiday season.

Thanks to its search engine, YouTube video service, and web partnerships, Google sells more internet advertising than any other business. Demand for its services has grown over the past year as the pandemic forced people to spend more time online and their new habits persisted.

Google’s advertising revenue rose 41% to $ 53.1 billion in the third quarter. Alphabet’s overall sales jumped to $ 65.1 billion, above the average estimate of $ 63.3 billion among analysts tracked by Refinitiv.

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“The digital shift of consumers is real and will continue even as we start to see people returning to stores,” said Philipp Schindler, chief commercial officer at Google. “The underlying takeaway is that people want more choice, they want more information, more flexibility, and we don’t see that being reversed.”

Shares fell 0.93% to $ 2,760.19 after the after-hours financial results were released.

Quarterly profit was $ 18.936 billion or $ 27.99 per share, beating expectations of $ 24.08 per share and marking a third consecutive quarter of record earnings. Alphabet’s profits are subject to large fluctuations as accounting rules require the company to measure unrealized gains from its investments in startups as revenue.

Investors had braced themselves for some selling challenges for Google.

Consumer concern about how Google and other companies are using their surfing behavior to profile them and then choose which ads to serve has grown. In the latest challenge, Apple Inc (AAPL.O), whose iPhones make up half of the smartphones in the United States, has given its users more control to stop tracking in recent months. The change led advertisers to recalibrate their spending in a way that Google’s competitors, Snap Inc (SNAP.N) and Facebook Inc (FB.O) said, hurt their sales in the third quarter. Read more


Alphabet CFO Ruth Porat reported a “modest impact” on YouTube ad sales thanks to Apple’s efforts. But analysts said Google on the whole was less affected than its peers because its search engine collects data on user interests that is valuable to advertisers and unmatched in the industry.

“They are almost completely immune to Apple’s changes,” said Collin Colburn, analyst at technology consultancy Forrester.

Other businesses have also faced downturns as advertisers slashed spending as they struggled to recruit and keep shelves fully stocked amid hiring and supply chain challenges caused by the pandemic. Schindler said supply chain challenges only affected Google’s auto ad sales.

Google Cloud, which tracks Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) in cloud services market share, increased revenue 45% to $ 4.99 billion, slightly lower estimates of $ 5.2 billion.

Alphabet’s total costs rose 26% to $ 44.1 billion in the third quarter, and the company’s headcount surpassed 150,000 employees.

Alphabet shares have outperformed those of many large peers since the end of last year, rising around 57%. Microsoft is up 39%, Facebook 20% and Amazon 2% over the same period.

But Alphabet shares are trading at a slight discount to Facebook, the Internet’s second-largest online ad seller. Facebook is trading at 6.8 times expected revenue over the next 12 months, compared to 6.4 times for Alphabet.

In recent weeks, Facebook has been inundated with accusations from a former employee who leaked thousands of confidential company files to the media and filed complaints with the U.S. securities regulator about Alleged misrepresentation by the company regarding its risks of hosting inappropriate content. Read more

Google has been caught in some of the fallout. A YouTube policy official testified before the US Congress earlier Tuesday alongside other companies about the harms of social media for young users. Read more

Investors are also awaiting further changes in Google’s business following a regulatory review. US authorities and others have alleged that some of the company’s advertising and research practices are anti-competitive, although the company says they must benefit users. In a concession to critics last week, Google said it would reduce some of the fees it collects for apps on its Play app store starting next year.

But the move could end up generating new revenue for Google if it prompts companies like music streamer Spotify Technology SA (SPOT.N) to start selling subscriptions through their apps and give Google 10 to 15 percent of the money. sum.

Alphabet’s Porat said on Tuesday that earlier cuts in gaming fees would reduce sales.

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Reporting by Nivedita Balu in Bengaluru and Paresh Dave in Oakland, California. Editing by Arun Koyyur and Matthew Lewis

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