In first disclosure, Youtube ad revenue at $15bn last year
SAN FRANCISCO: Google parent Alphabet missed revenue expectations in the fourth quarter despite stellar growth at Youtube and in the cloud, earnings figures released Monday showed. Google CEO Sundar Pichai touted Youtube as a revenue star, with ad revenue reaching $15 billion last year, an increase of 36% from 2018.
SANFRANCISCO: Alphabet Inc.’s new chief executive officer (CEO) Sundar Pichai unveiled sales figures that investors have long demanded, but shares fell 5% as Google’s advertising business and the new data about Youtube and Google Cloud broadly disappointed.
Pichai had sought to counter slowing revenue growth in the company’s main advertising business by pointing to the Silicon Valley firm’s younger units.
But Pichai’s reveal that Google’s Youtube video streaming unit is generating ad revenue at a pace of $15 billion annually put it below rough estimates as high as $25 billion.
Divulging 53% quarterly revenue growth for Google’s cloud services compared with a year ago meant it grew slower than the business it is trying to catch up to, Microsoft Corp.’s Azure. It reported a 62% quarterly rise in sales last week, or 39% when considering some cloud services Microsoft sells through other units.
While financial analysts applauded the new transparency from Alphabet, some questioned executives for the second time in the last four quarters to explain why overall revenue has been missing or just barely meeting their expectations. Sales growth dipped below 20% in three quarters during 2019, compared to just once in the previous three years.
Alphabet has blamed currency exchange rates and its constant tweaking of features, saying that it is not focused on quarterly marks.
“We continue to be very focused on the benefit from better measurement, better ad delivery, better user experience,” Alphabet chief financial officer Ruth Porat responded to an analyst. “But there will be variability over time because we’re very focused on what’s in the right long-term interest.”
Shares of the company fell about 4.5% in extended trading to $1,416. “The stock was priced for perfection, and a top-line miss was enough to send it lower,” said Michael Pachter, analyst at Wedbush Securities. “Youtube was impressive at $15 billion for the year, Cloud less so at $8.9 billion.”
Other financial analysts said Youtube’s ad revenue was underwhelming too.
“Youtube is smaller than generally assumed, but on the flipside, search seems to have accelerated and is growing faster than feared,” said James Cordwell, analyst at Atlantic Equities.
Google through its namesake search engine as well as properties such as Youtube has been the web’s biggest draw for advertisers for a decade, enabling it last month to become the fourth listed company to top $1 trillion in market capitalisation.