Through its search engine, YouTube video service and
partnerships across the Web, Google sells more Internet advertisements than any
other company. Demand for its services surged in the past year as the pandemic
forced people to spend more time online, and their new habits have persisted.
Google advertising revenue rose 41 percent to $53.1 billion
during 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.
"The consumer shift to digital is real and will
continue even as we start seeing people return to stores," said Philipp
Schindler, Google's chief business officer. "The underlying takeaway is
that people want more choice, they want more information, more flexibility, and
we don't see this reversing."
Shares fell 0.93 percent to $2,760.19 following the
after-hours release of the financial results.
Quarterly profit was $18.936 billion or $27.99 per share,
beating expectations of $24.08 per share and marking a third-straight quarter
of record profit. Alphabet's profit is subject to wide fluctuations because
accounting rules require the company to measure unrealised gains from its
investments in startups as income.
Investors had braced for some sales challenges for Google.
Anxiety by consumers over how Google and other companies use
their browsing behaviour to profile them and then pick which ads to show has
become widespread. In the latest challenge, Apple, whose iPhone devices account
for half of the smartphones in the United States, gave its users more control
to stop tracking over the past few months. The change led advertisers to
recalibrate their spending in ways that Google rivals Snap, and Facebook said
hurt their third-quarter sales.
Regulatory scrutiny
Alphabet's chief financial officer, Ruth Porat, reported
"modest impact" on YouTube advertisement sales from Apple's efforts.
But analysts said Google overall was less affected than peers because its
search engine collects data on user interests that is valuable to advertisers
and is unmatched in the industry.
"They are almost completely immune to Apple's
changes," said Collin Colburn, an analyst at tech consultancy Forrester.
Other companies also faced slowdowns because advertisers cut
spending as they struggled to staff up and keep shelves stocked amid hiring and
supply-chain issues brought on by the pandemic. Schindler said supply-chain
challenges affected only Google's sales of automotive ads.
Google Cloud, which trails Amazon and Microsoft in cloud
services market share, increased revenue by 45 percent to $4.99 billion,
slightly below estimates of $5.2 billion.
Alphabet's total costs increased 26 percent to $44.1 billion
in the third quarter and the company's workforce size passed 150,000 employees.
Alphabet shares have outperformed those of many big peers
since the end of last year, rising about 57 percent. Microsoft is up 39
percent, Facebook 20 percent and Amazon 2 percent over the same period.
But shares of Alphabet trade at a slight discount to
Facebook, the Internet's No. 2 seller of online advertisements. Facebook trades
at 6.8 times expected revenue over the next 12 months compared with 6.4 times
for Alphabet.
Facebook has been swamped with accusations in recent weeks
from a former employee who leaked thousands of confidential company files to
media and filed complaints with the US securities regulator over alleged
misrepresentations by the company about its risks from hosting inappropriate
content.
Google has been caught up in some of the fallout. A YouTube
policy official testified to US Congress earlier on Tuesday alongside other
companies about the harms of social media to young users.
Investors also await further changes to Google's businesses
as a result of regulatory scrutiny. US and other authorities have alleged some
of the company's practices in advertising and search are anticompetitive,
though the company argues they are to benefit users. In one concession to
critics last week, Google said it would cut some of the fees it collects from
apps on its Play app store starting next year.
But the move could end up generating new revenue for Google
if it leads companies such as music streamer Spotify to start selling
subscriptions through their apps and giving Google 10 percent to 15 percent of
the sum.
Alphabet's Porat said on Tuesday that earlier trims to Play
fees would cut in to sales. -Reuters
0 comments:
Post a Comment