Google Revenue Grows As Online Advertising Market Thrives

Google’s parent company has eased its digital dominance, recording its highest quarter on record in terms of sales and profits behind a flood of online ads from companies vying for clients in reopened economies.

The solid results showed how Google emerged stronger from a Covid-19 pandemic that has sped up online shopping, online food orders, and consumption of streaming videos. The explosion of digital activity has led companies to invest marketing dollars in Google search ads, Maps and YouTube, underscoring the preeminence of its products.

Alphabet Inc.

GOOG -1.22%

reported second-quarter revenue of $ 61.88 billion, a 62% increase from the previous year, when its unassailable advertising activity plummeted as the coronavirus crippled the economy. Profit more than doubled to $ 18.53 billion, with earnings per share exceeding analysts’ expectations.

“We have seen a rising tide of consumer and online business activity,” said Managing Director Sundar Pichai. He said digital publishers and YouTube partners earned more during the period than at any time in the company’s history.

The company achieved $ 50.44 billion in revenue from advertising, a 69% increase aided by a searing U.S. market where ad spend is set to be the fastest in post. war. YouTube’s advertising business raised $ 7 billion in revenue, an 84% increase from the previous year.

Class A shares rose more than 3% in after-hours trading. The stock closed at $ 2,638 on Tuesday.

Other tech companies have benefited from a booming digital advertising market. Break Inc.

revenue more than doubled last week behind strong user growth, while Twitter Inc.

reported sales jumped 74% behind an increase in advertising.

Google’s expected sales growth reflects a return to form for a money-making machine that has seen revenue increases quarterly for a decade. The pandemic put a momentary end to this streak when sales fell 1.8% during the June period of last year as major advertisers cut spending, especially in a travel industry that represents about 15% of sales.

Google has since reported an acceleration in revenue each quarter. With vaccinations allowing countries to reopen, travel and leisure companies are spending a lot to entice customers who fly after a year at home.

Retail was the biggest advertising sector in the quarter, said chief commercial officer Philipp Schindler. He said Google’s decision last year to list brands that weren’t paid advertisers in its Shopping tab increased listings and boosted sales. He cited Bed, Bath & Beyond as an example of a company that maintained an online shopping and in-store pickup program in the pandemic era, which the retailer promoted on Google and YouTube.

The rise in digital advertising is expected to benefit Google and its peers for the remainder of the year. GroupM recently raised its forecast for global ad sales to $ 749 billion for the year, a 19% increase from last year, up from its earlier expectations of 12% growth. Still, the company declined to forecast future earnings, highlighting uncertainty given the recent surge in Covid-19 cases.

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

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

He also faces legal action from the Justice Department, alleging he is using exclusionary agreements to preserve a monopoly for his search engine. This trial and two other lawsuits are expected 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. He says his Play Store is part of an open operating system where customers can download apps directly from developers.

Investors have largely ignored lawsuits, regulations and investigations, pushing stocks up more than 50% this year until Tuesday’s close. Analysts are confident that Google, which declared $ 135.86 billion in cash, cash equivalents and short-term investments at the end of June, has enough resources to pay the fines.

“I don’t want to poop, but investors are focusing on the strength of the underlying business, not the nicks on the surface,” said Jordan Kahn, president of ACM Funds, a Los Angeles-based company with $ 175 million. under management which counts Alphabet as its second largest holding. “Later, if the government unites, it could be important. “

The strength of Google’s advertising business is expected to eclipse the increase in sales of its cloud computing division. The company has spent aggressively to challenge’s dominance Inc.

and Microsoft Corp.

in the lucrative cloud storage industry. He said cloud sales rose 54% to $ 4.63 billion in the quarter.

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

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Write to Tripp Mickle at [email protected]

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