Alphabet Inc Tries to Put its Best Foot Forward
Although investors do not appear to be pleased, the CFO Ruth Porat tried his best to express satisfaction about an excellent start to the year. He talked about the big bets (other projects under Alphabet apart from Google) which are being focused on. He said that these steps are being taken to ensure long term growth. So while revenue grew by 17% Y-o-Y, the growth was as much as 23% on a constant currency basis.
Google overshadows other segments of Alphabet by leaps and bounds in terms of revenue. While last year the Google segment brought in about $17.178 bn in revenue, ‘other bets’ brought in just $80 mn. And while this year the latter has more than doubled to $166 mn, it is still not even 1% of the approx. $20.091 bn that the Google segment brought in. This extreme imbalance makes sense because many of the projects under ‘other bets’ are being undertaken at an exploratory stage and have not been effectively monetized yet. Some projects are being undertaken purely as experiments.
More than a fifth of Google’s advertising revenues continue to be spent on traffic acquisition costs (TAC). An overwhelming majority of the revenues of Google Network members come from TAC alone.
Where are its Products and Services Headed?
Not known to many, ‘other bets’ include the sort of projects which haven’t really dominated the world yet like the search engine itself has. This includes self-driving cars, Google Fiber and Nest. This year, they have together caused a loss of $802 mn in Q1 2016 (it was $633 million in Q1 2015). Throughout 2015, these projects ended up costing the firm $3.6 bn. But as written above, some projects are not yet monetized and some are. Most of the trickling revenue (compared to that of the search engine itself) in this segment is coming from Google Fiber, Verily and Nest.
Google has been focusing on mobile search since long before Microsoft adopted a strategy of ‘mobile first, cloud first’. As per Porat, the efforts seem to be paying off. Revenue from mobile search increased a lot during the quarter and left behind that from desktop search again, which itself posted modest gains. Mobile advertising and programmatic advertising continue to be strong growth areas for the firm.
None other than CEO Sundar Pichai talked about a few technology-related aspects of how things have changed with people signing in to Google. A growing number of people are remaining signed-in to Google and by doing so they generate a lot of activity across the portfolio of products that Google has to offer. This naturally makes it a marketer’s delight for targeting. Pichai went on to claim that all users are signed in when it comes to mobile devices. In case this is true, then it may mean that a majority of Google’s user base is signed-in, because it is known that more than 50 per cent of its users are on mobile devices. This number will naturally grow over time. Pichai also made another bold claim that can serve as a milestone in the history of online video, maybe even in terms of the world wide web overall: YouTube now reaches more people belonging to the 18-34 years’ age group compared to any television network.