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

Confused about which English subject to choose in year 11 and 12? Here's what you need to know

arrow_forward

We've heard of R numbers and moving averages. But what are k numbers? And how do they explain COVID superspreading?

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Scott Morrison's interview with Ray Hadley, 2GB

RAY HADLEY: Prime Minister, good morning to you.   PRIME MINISTER: G’day, Ray.   HADLEY: Gee, you’ve had a week.   PRIME MINISTER: Well, there's been a lot of weeks like this. This time last...

Scott Morrison - avatar Scott Morrison

Ray Hadley's interview with Scott Morrison

RAY HADLEY: I'm going to go straight to the Prime Minister, Scott Morrison is on the line right now. Prime Minister, good morning to you.    PRIME MINISTER: Good morning, Ray.   HADLEY: Just d...

Ray Hadley - avatar Ray Hadley

Defence and Veterans suicide Royal Commission

Today the Government has formally established a Royal Commission into Defence and Veteran Suicide following approval by the Governor-General.   Prime Minister Scott Morrison said the Royal Commi...

Scott Morrison - avatar Scott Morrison

Business News

9 Smart Hacks for Your First Day at Work

No matter how much work experience you have, the first day with a new company can be very stressful. Even the biggest professionals find the change of location and work collective a little frighte...

Chloe Taylor - avatar Chloe Taylor

Record year of growth for Tweed based business The Electrical Co

While many businesses struggled to stay afloat during the COVID-19 affected 2021 financial year, Tweed Heads based The Electrical Co. completed more than 50,000 smart meter installations across Aust...

a contributor - avatar a contributor

The Most Common Reasons why Employees End Up Leaving a Company

It is important for businesses to make sure they find the right people for their open positions. That is why a lot of companies are relying on professional outplacement services. A lot of companie...

NewsServices.com - avatar NewsServices.com