Image Credit: Jolie O’Dell / VentureBeat
If technology is ubiquitous these days, the areas where companies can make money from it seem much scarcer. In 2017, only a few sectors can be relied on to generate profitable businesses: mobile ads, streaming video, AI, and the cloud.
Alphabet has wended its way into each of these four markets. It’s not a leader in all of them – it lags Amazon and Microsoft, for example, in the cloud – but it’s relying on a mix of all of them to keep its revenue growing by more than 20 percent a year. And for a $680 billion company that will make more than $100 billion this year, that’s an unusually strong growth rate.
Alphabet said its revenue rose 21 percent to $26 billion in the second quarter (that number was 22 percent in the first quarter). On a call to discuss earnings with analysts, CEO Sundar Pichai and CFO Ruth Porat presented anecdotal evidence and bullish (if cherrypicked) metrics to buttress the idea that the company has established a solid foothold in these four areas of tech growth.
Mobile
Google’s advertising revenue rose 18 percent to $22.7 billion, driven by a 52-percent rise in paid clicks. But ad-revenue minus traffic-acquisition costs, or TAC, rose only 16 percent. Porat spun the rise in TAC costs – equal to 22 percent of revenue, versus 21 percent a year earlier – as a positive thing for Google’s overall growth. “Our strongest growth areas, namely mobile search and programmatic carry higher TAC,” she said.
In other words, when it comes to ads, the shift to mobile is a good thing for long-term revenue growth. Even if sometimes, like last quarter, it means slightly higher costs.
Video
Porat noted that YouTube was a strong contributor to revenue growth, while Pichar added that 1.5 billion people visit YouTube each month, with each spending an average of 60 minutes a day watching its videos. YouTube may not quite have the scale of Facebook’s 2 billion users, but it has the kind of video engagement that Mark Zuckerberg dreams about at night.
“YouTube is scaling really well globally,” Pichai said. “Just like search did.”
Cloud
Google’s “other revenue” – which includes revenue from Google Play, hardware, and its cloud business – rose 42 percent last quarter to $3.09 million. Pichai said the number of new cloud deals last quarter that were worth more than $500 million tripled from a year ago, and that the company added new cloud regions in London, Singapore, and Sydney.
Underscoring the importance of the cloud to Google, Porat added that the bulk of new hires were made in its…
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