Google owner Alphabet Inc. reported higher-than-expected third-quarter ad sales on Tuesday, a sign that the business is crossing new frontiers of tracking mobile users and that online shopping is as popular as the holidays. growing in season.
Through its search engine, YouTube video service, and partnerships on the Web, Google sells more Internet ads than any other company. Demand for its services grew over the past year as the pandemic forced people to spend more time online, and their new habits persisted.
Google advertising revenue grew 41% to $53.1 billion during the third quarter. Alphabet’s total sales reached $65.1 billion among analysts tracked by Refinitiv, which exceeded the average estimate of $63.3 billion.
“The consumer shift to digital is real and will continue as we begin to see people return to stores,” said Google’s chief business officer, Philip Schindler. “The underlying conclusion is that people want more choices, they want more information, more flexibility, and we don’t see the reverse.”
Shares fell 0.93% to $2,760.19 after financial results were released after hours.
Quarterly profit was $18.936 billion, or $27.99 per share, beating expectations of $24.08 per share and marking the third-straight quarter of record profit. Alphabet’s profit is subject to wide fluctuations because accounting rules require the company to measure unrealized profit as income from its investments in startups.
Investors had faced some sales challenges for Google.
Concern by consumers about how Google and other companies use their browsing behavior to profile them and then which ads to show has become widespread. In the latest challenge, Apple Inc., whose iPhones account for half of smartphones in the United States, over the past few months gave its users more control to stop tracking. The change prompted advertisers to recalculate their spending in a way that Google rivals Snap Inc. and Facebook Inc. said hurt their third-quarter sales.
regulatory scrutiny
Alphabet’s chief financial officer, Ruth Porat, reported a “slight impact” on YouTube ad sales from Apple’s efforts. But analysts said Google was less affected than peers overall because its search engine collects data on user interests that is valuable to advertisers and unmatched in the industry.
“They’re almost completely immune to Apple’s changes,” said Colin Colburn, an analyst at tech consultancy Forrester.
Other companies also faced a slowdown as advertisers cut spending as they struggled to staff and stock shelves amid hiring and supply-chain issues brought on by the pandemic. Schindler said supply-chain challenges only affected sales of Google’s automotive ads.
Google Cloud, which lags behind Amazon.com Inc and Microsoft Corp in cloud services market share, grew revenue 45% to $4.99 billion, slightly below estimates of $5.2 billion.
Alphabet’s total costs rose 26% to $44.1 billion in the third quarter and the company’s workforce size passed 150,000 employees.
Alphabet’s shares have outperformed several larger peers, rising nearly 57% since the end of last year. Microsoft is up 39%, Facebook 20% and Amazon 2% over the same period.
But Alphabet’s shares trade at a slight discount compared to Facebook, the Internet’s No. 2 seller of online ads. Facebook is trading at 6.8x expected revenue over the next 12 months, compared to 6.4x for Alphabet.
Facebook has been flooded in recent weeks with allegations from a former employee who leaked thousands of company confidential files to the media and the US securities regulator over alleged misrepresentation of the company’s risks from hosting inappropriate content. Complaint was filed with
Google is stuck in some results. A YouTube policy official testified to the US Congress on Tuesday, along with other companies, about the harms of social media to young users.
Investors are waiting for further changes to Google’s businesses as a result of regulatory scrutiny. The US and other authorities have alleged that some of the company’s practices in advertising and search are competitive, although the company argues that they are meant to benefit users. In a 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 generate new revenue for Google if it starts selling subscriptions through its apps to companies like music streamer Spotify Technology SA and gives Google 10% to 15% of the amount.
Alphabet’s Porat said on Tuesday that earlier cuts in play fees would cut sales.
Disclaimer: This post has been self-published from the agency feed without modification and has not been reviewed by an editor
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