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Google's parent Alphabet finally shows off YouTube

Tuesday, February 4, 2020 by Snacks

It's my time to shine... YouTube finally got its moment in the Alphabet earnings spotlight. First, the Google-parent reported a disappointing performance for its core search-ads biz. Then, for the first time ever, Alphabet revealed YouTube and cloud revenues (probably to distract from its buzz-kill ad earnings).

  • YouTube: Needs no introduction. Google bought it in 2006 for $1.6B and just revealed that YouTube brought in over $15B revenue in 2019 (up from $11B in 2018). Your "Babies & Puppies Compilation" views are sandwiched with ads — YouTube says it forwards most of those ad bucks to video creators.
  • Cloud: That includes G-Suite favorites like Google Drive, Docs, and Sheets, which "magically" save your edits and make them shareable in real-time (aka, the internet). Those upgraded storage cloud accounts brought in almost $9B, compared to nearly $6B in 2018.

Back to the core biz... Google's an ad company. Its overall revenue, mostly made up of online ads, rose only 16.5%, sending shares down 5%. Profits still topped estimates though, thanks in part to an extremely low tax rate for the quarter. Alphabet set aside just $33M for taxes (0.07% rate), down from $1.1B in the same quarter last year.

THE TAKEAWAY

YouTube may get milked... Despite the less-than-expected revenue, last month Alphabet became the 4th US company to hit a $1T valuation (that's 1,000 billions). But with success comes fresh challenges: government investigations threaten to break up Google's biz, while rivals like Amazon are gaining in the ad space. That could affect YouTube:

  • Alphabet might have to start milking more profit out of YouTube.
  • Google's CEO: There is “significantly more room” to make money off YouTube’s users.
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