Google ready to take advantage of the boom in online advertising

Google’s parent company is expected to post its strongest second-quarter sales growth in 14 years, driven by an increase in online advertising from businesses vying for customers in reopened economies.

The expected results should bolster investor confidence that Alphabet Inc. emerged stronger after the Covid-19 pandemic accelerated online shopping, online food ordering and streaming video consumption, according to analysts. The explosion in digital business has led companies to pour marketing dollars into ads on Google Search, Maps and YouTube, underscoring the prominence of the company’s products.

Wall Street expects these trends to stand out in Alphabet’s April-June results, with analysts polled by FactSet forecasting sales of around $56.19 billion and profit of $12.94 billion. dollars. The company posted $38.3 billion in revenue and $6.96 billion in profit during the same period a year earlier when the pandemic battered its digital advertising business.

Other tech companies have benefited from a booming digital ad market. Snap Inc. announced last week that its revenue had more than doubled thanks to strong user growth, while Twitter Inc. announced that its sales had jumped 74% thanks to increased advertising.

Google’s expected sales growth reflects a return to form for a money-making machine that has seen revenue increases every quarter for a decade. The pandemic momentarily ended that streak when sales fell 1.8% in the June period last year as major advertisers cut spending, particularly in a travel industry that accounts for around 15% of sales.

Since then, Google has reported an acceleration in revenue every quarter. With vaccinations allowing countries to reopen, travel and leisure companies are spending big to win customers who take flight after a year at home.

The rise of digital ads should benefit Google and its peers throughout the year. GroupM recently raised its forecast for global advertising sales to $749 billion for the year, a 19% increase over last year, compared to its earlier expectation of 12% growth.

Regulators and lawmakers in the United States and abroad have raised concerns that the company’s resilience speaks to the power of its products. Google is the world’s largest digital advertising company by revenue. Its search engine has a 92% share of global Internet searches and its Maps offerings have an 89% share of digital navigation services.

In early June, Google agreed to pay French regulators $270 million to settle a case alleging it abused its leadership position in digital advertising. Shortly after, the European Union opened a formal investigation into its digital advertising business, including its alleged exclusion of competitors from brokering ad buys on YouTube. This month, three dozen states filed an antitrust lawsuit in the U.S. District Court for Northern California, alleging the company operates an illegal monopoly with its Play app store.

It is also facing legal action from the Department of Justice, alleging that it uses exclusion agreements to preserve a monopoly for its search engine. This trial and two other state trials are scheduled to begin in 2023.

Google has long said that it operates in a competitive market where people choose to use its services and advertising tools because they are effective. It says its Play Store is part of an open operating system where customers can download apps directly from developers.

Investors largely ignored lawsuits, settlements and investigations, sending stocks up more than 50% this year through Monday’s close. Analysts are confident that Google, which reported $135.1 billion in cash, cash equivalents and short-term investments at the end of March, has enough resources to pay the fines.

“I don’t want to poop, but investors are focused on the strength of the underlying business, not the indentations on the surface,” said Jordan Kahn, chairman of Los Angeles-based ACM Funds. with $175 million. under a management that counts Alphabet as its second largest holding. “At the end of the day, if the government manages to come to an agreement, it could be important.”

The strength of Google’s advertising business is expected to eclipse increased sales from its cloud computing division. The company has been spending aggressively to challenge the dominance of Amazon.com Inc. and Microsoft Corp. in the lucrative cloud storage business. Analysts estimate it increased sales by 34% to $4.05 billion in the quarter.

Still, its cloud computing division remains a small-scale player with a 6% share of a market that Amazon and Microsoft control with shares of 41% and 20%, respectively, according to research firm Gartner Inc.

This story was published from a news agency feed with no text edits

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