Alphabet Records Surge In Ad Revenues As Diversification Plays Out Well

Alphabet’s profits increased by 29% to reach $5.43 billion managing to beat estimates by analysts. This was driven largely by an increase in advertising revenue. An advertiser boycott that had earlier in the year affected YouTube had minimal impact.

Revenues for the quarter that ended on March 31 increased by 22.2% to reach a figure of $24.75 billion. Google’s paid clicks also increased by 44% against estimates of 29.7%. Net income increased to $5.43 billion which translated to $7.73 a share. A year ago the net income was $4.21 billion which translated to $6.02 a share. For the quarter that ended last month analysts had been expecting a net income of $7.34 a share.

Dependence on the West

When broken down into regions, a disproportionately big portion of advertising revenues were generated in western markets meaning Google continues to rely heavily on Europe and the United States.

Google’s dominance in search advertising is expected to continue in coming years. According to eMarketer, a research firm, Google’s market share in search advertising will increase to 61.6% this year from 60.6% that the tech giant commanded last year. While ads on mobile devices do not fetch as much money as those on desktop computers, the rising volume is compensating for the difference in rates.

Non-advertising revenues

Though Google has been heavily reliant on revenues generated by its advertising business, the results demonstrated that the company is succeeding in its diversification strategy. The non-advertising revenues of the Mountain View, California-based tech giant increased by 49.4% to reach a figure of $3.10 billion. Most of the advertising revenues were drawn mainly from Play Store, Pixel smartphones and cloud computing.

Previously, Alphabet had been trailing behind Amazon Web Services and Microsoft in cloud computing. But since Diane Greene, a veteran of enterprise computing, joined to head Alphabet’s cloud computing efforts, the unit is slowly becoming a force to reckon with.

Loss-making ventures

Not all of Alphabet’s non-advertising ventures are posting profits though. The likes of Verily (a life sciences firm), Nest (a thermostat maker), Google Fiber and Waymo (the driverless car unit) all recorded modest revenues and large losses. These ventures combined posted revenues of $244 million which was an increase from $165 million year-over-year. The losses registered however reached $855 million up from $774 million from a similar period a year ago.

According to the latest quarterly results Google now holds cash reserves amounting to $92.4 billion. Close to 60% of this money is held offshore.

 

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