As World Spends Online, Alphabet Revenue Skyrockets

Alphabet earnings

One year after the pandemic led to a sharp fall in Alphabet’s ad spending, the company’s Q1 2020 ad revenue has more than rebounded, sending the stock upwards in after-hours trading.

Alphabet revenue grew 34% in Q1 to $55.3 billion. The amount Google paid out to its partners (or traffic acquisition costs) trailed revenue, growing 30% to $9.7 billion.

YouTube was Alphabet’s top performer, drafting off the rise in consumers using flocking to online video for entertainment and education. Revenue grew by 49% to $6 billion.

Performance advertising remains a strength for YouTube. The number of advertisers using TrueView for action, its video performance advertising product, doubled over the past year. according to Google SVP and chief business officer Philipp Schindler.

YouTube is working on bringing more brand advertising to its platform, so it can “address both brand and performance goals at scale,” Schindler said.

One key selling point for brand advertisers is incremental reach.

More 18 to 49-year-olds watch YouTube every month than watch linear TV combined, Schindler said. Plus, YouTube claims to have 2 billion monthly logged-in users. Kellogg’s saw 30% incremental reach by advertising on YouTube for a Special K campaign. Taco Bell added 27% in incremental reach through a YouTube campaign – reflecting how YouTube is delivering on branding goals.

On the platform safety side, YouTube recently added a metric, “violative view rate,” that tracks how many YouTube views go to content that violates its policies. In Q4 of last year, it averaged 16 to 18 views per 10,000, down 70% from 2017, according to CEO Sundar PIchai. Investments in machine learning drove down that rate.

Google Network ads grew by 30% to $6.8 billion. Strength in Google Ad Manager and AdMob, particularly Universal App Campaigns, drove that growth, according to CFO Ruth Porat. As usual, she declined to give more detail even when pressed by investors.

Google highlighted how it’s been able to provide omnichannel retailers with resources to adapt their businesses. Google Maps notified people of curbside pickup, for example. Through use of Google tools, Dick’s Sporting Goods grew ecommerce sales 100% and recently added in YouTube brand awareness campaigns.

Michael’s highlighted its omnichannel fulfillment approach using search and YouTube TrueView in action to tap into arts and crafts video, Schindler said. Ecommerce sales went up 350% in the past year.

But from retail to ecommerce to streaming, it’s too soon to tell what consumer trends are here to stay, Porat warned. For example, people only need to buy home office furniture en masse once.

“We think it’s premature to assess how durable these consumer behavior trends are,” Porat said.

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