Daily Bulletin

The Conversation

  • Written by The Conversation Contributor

Google reported its first-ever quarterly earnings this week under the new structure of Alphabet. The earnings surpassed analyst expectations and Alphabet is now worth more than Apple with a market value of around US$555 billion, compared to Apple’s US $535 billion.

The majority of Google’s revenue continues to come from advertising through YouTube, other ads, search and in particular, mobile search. What makes this interesting is that Facebook has posted a 40% increase in its revenue this quarter with most of it driven by mobile advertising.

Both Facebook and Google are benefiting from the continuing shift in advertising spending towards digital. The fact that Facebook doesn’t seem to be impacting Google’s revenues highlights the fact that advertisers see both platforms as being valuable rather than choosing one over the other.

What Google’s restructure into Alphabet was able to highlight however was the amount of money being spent on what has been classed as “Other Bets”. This includes the sections of Alphabet which include Access/Google Fiber, Nest, Verily (formerly its Life Sciences Division), GV (formerly Google Ventures), Google Capital, Calico (biotech) and X, the division that is responsible for the driverless car and Google Glass.

Together, these different areas lost US $3.5 billion in 2015 with just US $448 million in revenues. The results don’t go down into enough detail to know how much is coming from what specific projects and whether those projects are in themselves profitable.

Although it would be easy to just look at the revenues of companies like Google and Facebook and see them as being driven by advertising, the point of these companies is that it highlights how important the functionality that they deliver is. Gmail for example, Google’s email system now has 1 billion monthly active users.

Facebook itself has 1.59 billion monthly active users with 1.44 billion monthly active users on their mobile platform. Facebook’s messenger app has 800 million monthly active users and WhatsApp has 1 billion.

Messaging, search, and social media (along with word processing) are the apps that have become core to our use of the internet, especially through mobile phones. What is ironic perhaps is that 75% of Google’s mobile advertising revenue comes from Apple devices. Apple’s share price has seen a 20% decline in the past 2 months, with analysts marking its prospects down because of slowing iPhone sales. Apple’s net income was three times that of Google’s for the last quarter.

It is difficult to see where any of these companies go to from their current mainstream revenue generators. All of the sideline projects are still in their infancy and even if they ever do become successful, will not achieve the same level of importance in global reach or revenue as advertising is for Google or the iPhone is to Apple.

When Alphabet was first announced, it was thought that splitting off the “Other Bets” into separate entities would enable them to be held to account financially. In fact, the entire Alphabet organisation was seen as a way to enable transparency in Google’s various business interests. This does not appear to have been the case however.

As far as money flows go, the massive losses the “Other Bets” are still incurring may be more apparent, but the money to keep them going is still coming from the same source, namely Google. The “Other Bets” are not being allowed to sink or swim on their own merits or their ability to generate their own revenue and profits. Other Bets losses represent 5% of Alphabet’s total annual revenues and perhaps as such, it isn’t a concern, although it is hard to believe that the losses would be tolerated on an ongoing basis without showing any sign of changing.

What was also not really made transparent was the performance of Google’s Cloud Platform. Cloud revenues are derived from providing other companies with computers and other services hosted by companies like Google, Amazon, Microsoft and IBM. Amazon Web Services generated revenue of nearly US $8 billion. Microsoft are now claiming annual revenues of US $9.4 billion and IBM US $5.3 billion.

Cloud services are to global enterprises what email and social media are to individual consumers. They are becoming integral to how companies will run their IT services in the future. So far, it doesn’t seem however that Google is making as much of an impact in this area as Amazon and Microsoft, at least, not that they are prepared to admit to.

Authors: The Conversation Contributor

Read more http://theconversation.com/alphabet-earnings-outstrip-apple-but-transparency-issues-still-cloud-results-53965

Writers Wanted

COVID has left Australia's biomedical research sector gasping for air


How Australian vice-chancellors' pay came to average $1 million and why it's a problem


The Conversation


Prime Minister Interview with Ben Fordham, 2GB

BEN FORDHAM: Scott Morrison, good morning to you.    PRIME MINISTER: Good morning, Ben. How are you?    FORDHAM: Good. How many days have you got to go?   PRIME MINISTER: I've got another we...

Scott Morrison - avatar Scott Morrison

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Business News

Nisbets’ Collab with The Lobby is Showing the Sexy Side of Hospitality Supply

Hospitality supply services might not immediately make you think ‘sexy’. But when a barkeep in a moodily lit bar holds up the perfectly formed juniper gin balloon or catches the light in the edg...

The Atticism - avatar The Atticism

Buy Instagram Followers And Likes Now

Do you like to buy followers on Instagram? Just give a simple Google search on the internet, and there will be an abounding of seeking outcomes full of businesses offering such services. But, th...

News Co - avatar News Co

Cybersecurity data means nothing to business leaders without context

Top business leaders are starting to realise the widespread impact a cyberattack can have on a business. Unfortunately, according to a study by Forrester Consulting commissioned by Tenable, some...

Scott McKinnel, ANZ Country Manager, Tenable - avatar Scott McKinnel, ANZ Country Manager, Tenable

News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion