Alphabet, Google’s parent company, on Tuesday released net profit that is below and below market expectations, at $16.44 billion (EUR 15.45 billion) for the first quarter, or 8% less than a year ago, when the online advertising giant had an exceptional quarter thanks to the pandemic. At 68 billion dollars (63.90 billion euros), turnover has increased by 23% in a year, but also slightly lower than analysts’ forecasts.
YouTube, in particular, seems to have made little progress in a year. Video platform ads generated just $6.9 billion (€6.48 billion) in the first quarter, not much more than last year’s $6 billion.
Compete with TikTok
In the mobile video consumption market, the highly popular platform TikTok “is now a major threat, and all indications are that they will continue to gain users and generate more revenue,” said eMarketer analyst Paul Verna for AFP. “This factor, combined with current economic pressures, doesn’t bode well for online advertising in general and for YouTube in particular.”
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In particular, he mentioned inflation and difficulties in the global supply chain, which force advertisers to “be careful with budgets”.
YouTube took a stance on TikTok territory in March 2021 by launching YouTube Shorts, a very short format (under 60 seconds). These videos now generate “more than 30 billion views a day, four times more than a year ago,” Alphabet’s leader Sundar Pichai welcomed during the conference call with analysts. He said his engineers “as usual would focus on creating a great user experience before working on monetization.”
The boss also assured that despite the resumption of activities suspended during the pandemic, “time spent on YouTube continued to increase”.
A difficult return to a more normal context
However, a possible “post-pandemic hangover” cannot be ruled out, notes Paul Verna. The big tech companies have “admittedly not celebrated, but the health crisis has given their business a huge boost,” he explained. “That kind of growth couldn’t last. Considering this aspect, the results are not disastrous at all, Google remains a leader in search and very solid in video.
Ruth Porat, the group’s chief financial officer, acknowledged that Google’s 2021 growth rate had benefited from the 2020 comparison.
She said the comparison would be even “more difficult” for the current quarter, a period also affected by the shutdown of its commercial activities in Russia, in connection with the war in Ukraine.
But the company should “benefit this year from the recovery in retail sales and the improvement of its supply chain, two market engines for online search, of which Google has a 59% share globally,” Paul Verna estimates.
A breakthrough in the cloud
Alphabet has also taken revenge: it now has almost 164,000 employees worldwide, compared to 140,000 a year ago. “We continue to invest cautiously […] in research and development and talent to support the creation of long-term value for all our shareholders,” said Ruth Porat, quoted in the press release on the results.
At the beginning of March, the company announced its intention to acquire the cybersecurity company Mandiant for about $5.4 billion (5 billion euros) to strengthen its cloud offering (remote computing).
Google Cloud saw its revenue increase by 44% to 5.8 billion dollars (5.45 billion euros). It is the third largest cloud service provider in the world. The market share rose to 9% at the end of 2021, from 7% at the end of 2020, according to research firm Canalys. AWS (Amazon), the industry leader, accounts for 33% of global cloud spend, with Azure (Microsoft) at 22%.