Google Ad Surge Helps Alphabet To Earn Record Profit

Higher-than-expected third-quarter ad sales were reported by Alphabet Inc, the parent company of Google, indicating that the company is overcoming new limitations on tracking mobile users and that online shopping remains as popular as ever as the holiday season approaches.

Google sells more internet ads than any other company, thanks to its search engine, YouTube video service, and relationships all over the Web. As the Covid-19 pandemic, last year forced people to spend more time indoors and hence online, there has been a large surge in demand for its services. And this new habit among customers still persists.  

During the third quarter, a growth of 41 per cent for Google’s advertising revenue at $53.1 billion was reported by the company.  Overall sales for Alphabet increased to $65.1 billion, exceeding the average expectation of $63.3 billion, according to 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.”

The company reported quarterly profit at $18.936 billion, or $27.99 per share, which was above market forecasts of $24.08 per share for the third quarter in a row.

Since accounting regulations require Alphabet to account for unrealized profits from its startup investments as income, there is wide fluctuation in the company’s profits.

Investors expected Google to face some sales hurdles.

Consumers are increasingly getting concerned about how Google and other tech companies like it profile them and then choose which ads to show them based on their surfing habits. In such a latest headwind for tech companies like Google, Apple Inc., whose iPhones account for half of all smartphones in the United States, granted its consumers greater control over whether or not they want to be tracked in the last few months. This alteration in privacy arrangement compelled online advertisers to rework the manner in which they spend advertisement money which reportedly hurt sales in the third quarter of Google rivals Snap Inc and Facebook Inc.

However, there was a “minimal impact” on YouTube ad sales because of the new rules of Apple, said Ruth Porat, Alphabet’s chief financial officer. And compared to its competitors, this act of Apple had lesser damage for Google, claimed analysts, since data on user interests is collected by its search engine which is valued by marketers and is unique in the tech and online advertising industry.

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

During the quarter, advertisers slashed spending as they fought to increase staff and keep inventories stocked amid recruiting and supply-chain challenges brought on by the pandemic, causing other businesses to slow down. According to Schindler, supply-chain issues only impacted Google’s car ad revenue.

Google Cloud, which trails Amazon.com Inc and Microsoft Corp in the cloud services industry, raised sales by 45 per cent to $4.99 billion, slightly less than analysts’ expectations of $5.2 billion.

In the third quarter, Alphabet’s total costs grew by 26 per cent % to $44.1 billion, and the company’s headcount surpassed 150,000 employees.

(Adapted from BusinessToday.in)

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