Alphabet exceeds expectations as the ‘dominant force in digital advertising’

28 Apr 2017

Google’s headquarters in Mountain View, California. Image: Asif Islam/Shutterstock

Alphabet’s latest quarterly earnings show that despite its subsidiary Google going through a rough patch in digital advertising, it is still a force to be reckoned with on Wall Street.

Although it is the parent company to a number of Google enterprises, the actual Google business for Alphabet remains its largest and greatest revenue generator.

In its first quarterly report for 2017, the corporation has shown once again that it is a formidable player in advertising, with revenues up more than $4bn on last year, from $20.3bn to $24.8bn.

This marks a 22pc increase in revenues year-on-year, up from 17pc the year before.

Meanwhile, Alphabet’s net profit amounted to $5.42bn, showing a huge 29pc gain on the same time last year.

What is interesting is that much of this success remains within Google’s online advertising revenues, from both search ads and YouTube.

The latter has proven controversial of late, with The Wall Street Journal recently publishing an article on brands that were unknowingly advertising on videos inciting hate speech and other inappropriate concepts.

As a result, these companies began a mass boycott of YouTube, much to the worry and chagrin of its army of creators.

Given that much of this occurred during the findings of this latest Q1 report, it proves that even Google can weather a storm of such scale and come out the other side with only a few scratches.

Other bets not as profitable

The resulting figures have also encouraged the stock market to react strongly, with Alphabet’s shares rising by nearly 3pc to $916.80 at the end of the trading day.

Aside from beating market estimates, analysts have described Alphabet’s stated figures as exceptional for a company that exists on such a scale.

Speaking to Reuters, analyst Colin Gillis of BGC Partners said: “For a company of Google’s size to post the growth that it has, is just a testament to the quality and usefulness of the products they make. They are the dominant force in digital advertising.”

However, Alphabet’s self-titled ‘Other Bets’, which includes all of its research and connectivity divisions such as Waymo and Google Fiber, have not fared as well as Google.

Despite announcing revenues of $244m – a near 50pc increase on 2016 – it still posted significant losses of $855m.

“We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet,” said Ruth Porat, CFO of Alphabet.

Google’s headquarters in Mountain View, California. Image: Asif Islam/Shutterstock

Colm Gorey was a senior journalist with Silicon Republic