Google earnings interpretation: advertising business increased significantly in the third quarter, and Apple’s privacy policy had little impact

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Tencent technology news on October 27, the third quarter financial report released by Google’s parent company alphabet on Tuesday showed that the company’s third quarter revenue reached US $65.118 billion, an increase of 41% over the same period last year, a 14 year high; The net profit was US $18.936 billion, an increase of 68% over US $11.247 billion in the same period last year.
Novel coronavirus pneumonia, which has been a Alphabet player, has been growing faster than Wall Street’s third quarter results, thanks to the rapid growth of digital advertising in the new crown pneumonia epidemic. In the past 12 months, the booming digital advertising market has accelerated, and the global digital advertising expenditure has increased by 26%, higher than the previous forecast of 15%, in line with the media purchasing agency GroupM. A large part of this expenditure goes to Google, which dominates global web search, digital navigation and online video ratings. The third quarter revenue of alphabet’s advertising business composed of search, maps and Youtube reached $53.13 billion, an increase of 43% over the same period last year.
Google’s revenue growth is supported by e-commerce advertisers who are keen to get customers of online search products. Over the past 12 months, Google has teamed up with Shopify to simplify search lists and ad purchases for 1.7 million retailers. The cooperation with Shopify makes retail advertising the main contribution to Google’s revenue growth.
Sundar Pichai, chief executive of alphabet, tried to maintain the growth of alphabet’s revenue by giving priority to the development of e-commerce, youtube and cloud computing. This helped the novel coronavirus pneumonia rebound from a slump in 2020, when some marketing owners cut their budget in the initial shock of the new crown pneumonia pandemic. Alphabet said that in the recent quarter, retail, tourism, media and entertainment industries increased advertising on Google platform.
Nevertheless, the fate of alphabet is still highly dependent on macroeconomic factors, including the supply chain downturn that plagues almost every industry, and may have an impact on retailers and advertising companies during the holiday shopping season. Alphabet is also disappointed by its video platform youtube and cloud division, both of which are designed to help it diversify its business.
In the third quarter, alphabet also bought back shares worth US $12.6 billion, and said that the total number of employees had reached 150028, an increase of 18000 over the same period last year. Ruth Porat, chief financial officer of alphabet, said in a conference call that the company would continue to invest in servers and real estate, and would increase the number of employees in Google services and Google cloud.
Apple’s influence
Although snap and Facebook warned that Apple’s guidelines would limit future revenue, Google had to sign an agreement on whether it was expected to be affected. Apple and Google are undoubtedly one of the most famous competitors in Silicon Valley, but behind the scenes, the two companies are indeed interdependent. According to statistics, apple and Google have maintained business of $8 billion to $12 billion in the past 12 months.
In recent months, Google’s retail advertising business has benefited from Apple’s new privacy coverage. Since April, Apple has asked applications to ask customers if they want to be tracked. These adjustments weakened the advertising performance of companies such as Facebook and snap, so many manufacturers shifted their spending to Google.
“There are no tigers in the mountains, and monkeys are kings,” said Brian Wieser, global president of enterprise intelligence at GroupM. “No matter what knowledge Google has, it is healthier than most other companies.” paulat said in a conference call on Tuesday that Apple’s adjustment of advertising tracking policy had a “moderate impact” on YouTube’s revenue. She added that “paying attention to privacy has always been the core of what we have been doing.” Philip Schindler, chief commercial officer of alphabet (Philipp Schindler) also said that Apple’s move to ban iPhone default advertising tracking is part of a broader privacy protection measure, which shows that Google’s advertising business has the ability to deal with these problems.
YouTube is another major driver of the revenue growth of alphabet. According to the financial report of alphabet, the total revenue of YouTube in the third quarter increased by 43% year-on-year to $7.21 billion. The revenue generated by YouTube in these 12 months is almost as much as that of streaming video giant Netflix, whose current market value is close to $300 billion.
Lawsuit ridden
Regulators and legislators may be the biggest problem for Google’s continued success. Lawyers in Texas and more than a dozen states have previously filed a lawsuit against Google. In this lawsuit, the plaintiff stressed how Google reduced advertising spending by 22% to 42% through its system, which is two to four times that of the competitive advertising exchange. In addition, Google also faces challenges from the Ministry of justice and an independent state alliance Antitrust lawsuit, accusing the company of reaching a secret agreement that benefits its search engine and promotion company and frustrates its competitors. In July this year, the third state alliance led by Utah filed a lawsuit against Google’s play app store. Google said these lawsuits were flawed and said it charged lower advertising fees than commercial advertising. The company It says its open working system allows customers to get applications directly from the developer’s website.
In response to some regulatory criticism, Google has adjusted its business. Previously, the company reduced the application subscription fee from 30% to 15%. Analysts expect the adjustment to affect Google’s revenue in the next 12 months.
As long as Google’s core search enterprise remains stable, alphabet investors will basically not consider this adjustment. As of Monday’s close, alphabet’s share price has risen nearly 60% in the past 12 months.

“For Google, in addition to the current regulatory issues, the most difficult issue is the regulation of massive data,” said Richard Kramer, founder and analyst of arete analysis, a London based consulting firm. How can the company maintain growth without aggressive threats when a 10% increase in revenue means an additional $10 billion.
Alphabet’s new bet has to point out the potential of this form. The company’s waymo subsidiary began to reduce costs on a large scale after developing driverless cars for nearly a decade. At the same time, verily Life Sciences, its subsidiary engaged in health analysis and Life Sciences, did not generate the total transformation revenue it wanted. Facts have proved that Google’s cloud computing business is essentially the most promising. After intensive investment in previous years, the Department has begun to slowly erode the share of market leaders Amazon and Microsoft. At present, Amazon and Microsoft’s cloud computing business occupy 41% and 20% market shares respectively. According to the financial report of alphabet, the revenue of Google cloud, which accounts for 6% of the market share, was $4.990 billion in the third quarter, an increase of 45% compared with $3.444 billion in the same period last year, less than the $5.04 billion expected by Wall Street; In the same period, the operating loss decreased to US $644 million from US $1.21 billion in the same period last year. (compiled by Tencent technology / Wuji)