In recent years, Amazon has continuously seized shopping-related advertising business from Google singers. As the expansion of advertising business slows down, Alphabet is looking for new sources of growth, and cloud computing is one of its main opportunities.

Editor’s note: This article is from “Tencent Technology” , reproduced with permission.

According to foreign media reports, Google’s parent company Alphabet released the company’s financial results for the fourth quarter of 2019 after trading on Monday. Earnings reports show that Alphabet’s revenue during the key year-end holiday shopping season was lower than Wall Street’s expectations, indicating that the company’s Google advertising business is unable to maintain growth in the face of increasing competition. This is Sundar Pichai’s first earnings report as CEO of Alphabet. Alphabet has adjusted its revenue disclosure in its financial report. It first disclosed YouTube and Google cloud revenues, hoping to attract investors’ attention.

In the fourth quarter ended December 31, Alphabet revenue was 46.08 billion U.S. dollars, an increase of 17% from the 39.276 billion U.S. dollars in the same period last year, and a 19% increase in constant exchange rate calculations, which was lower than the market analysts ’average estimate of 469.4. Operating profit was USD 9.266 billion, an increase of 13% from USD 8.221 billion in the same period last year; Net profit was USD 10.671 billion, an increase of 19% compared to USD 8.948 billion in the same period last year; earnings per share was USD 15.35, higher than the previous The same period of last year was 12.77 US dollars, exceeding the market expectation of 12.53 US dollars.

Youtube and Google Cloud

The biggest difference between Alphabet’s fourth-quarter financial report and previous financial reports is that it disclosed the revenue of Youtube and Google Cloud for the first time in the financial report, but the company did not explain the policy changes disclosed in its financial report. Alphabet CEO Sundar Pichai said in a statement: “I am very pleased with our continued progress in the search and construction of two new growth areas. The two areas are that the annual advertising revenue has reached $ 15 billion YouTube and Google Cloud with $ 10 billion in annual revenue. “

The financial report shows that YouTube’s total revenue in 2019 reached 15.149 billion U.S. dollars, an increase of 36% from 11.115 billion U.S. dollars in the previous year, which is almost double that in 2017. YouTube ’s fourth-quarter revenue reached 4.72 billion U.S. dollars, up from the previous quarter The year-on-year growth of US $ 3.61 billion was 31%. However, YouTube ’s revenue does not include non-advertising revenue similar to subscription services such as YouTube TV. This revenue is included in other Google revenues.Close it.

Google Cloud’s total revenue in 2019 reached USD 8.92 billion, a 53% increase from the USD 5.84 billion in the same period last year, and more than doubled from 2017; the fourth quarter revenue was USD 2.61 billion, which was higher than last year Over the same period, 1.71 billion US dollars increased by 53%. To keep up with Amazon and Microsoft in the cloud business, Alphabet has invested heavily. Amazon’s fourth-quarter revenue reached $ 9.9 billion, exceeding Google Cloud’s full-year revenue.

After Google hired former Oracle executive Thomas Kurian early last year to make it Google Cloud CEO, the company has completed a series of mergers and acquisitions, including the June acquisition of Elastifile , Acquired CloudSimple in November, and acquired Appsheet in January this year. Curry’s largest acquisition since he took office was last year’s $ 2.6 billion acquisition of data analysis company Looker.

For a long time, Wall Street analysts have called on Alphabet to report YouTube revenue separately because it is considered a significant part of the company’s advertising business. Although the Google Cloud business has not been launched for a long time, it has grown rapidly and is expected to compete with Amazon’s AWS and Microsoft Azure. Last July, Google stated that its cloud business had annualized revenues of just $ 8 billion and plans to triple its revenues in the next few years.

The first disclosure of Youtube and Google Cloud revenues in the earnings report indicates that after Pichai became CEO of Alphabet, the company will move towards greater transparency. In December last year, Larry Page, the former CEO of Alphabet and Google founder, stepped down, leaving Pichai, then chief executive of Google’s flagship subsidiary, to take on a wider business. Page and co-founder Sergey Brin, who also resigned as president of Alphabet, still retain control of the company.

U.S. federal and state regulators have been closely monitoring Google for any signs of a suspected monopoly. A coalition of 50 attorney generals from different states and territories has announced an investigation into Google’s advertising business. The new disclosure gives investors more insight into different parts of the Google advertising section that investigators may be focusing on.

Poor performance of advertising business

Ad revenue still accounts for most of Alphabet’s total revenue. In the fourth quarter, Google ’s advertising revenue was US $ 37.934 billion, an increase of 17% from US $ 32.518 billion in the same period last year, and the growth rate was lower than 20% in the same period last year. When Alphabet released its fourth-quarter 2018 financial results, it showed signs that the company’s advertising business was slowing. In the first quarter of 2019, the company released weak advertising sales data, causing the company’s stock price to subsequentlyThe biggest one-day drop since April 2010. In the day’s trading, Alphabet’s stock price fell by 7.5%, and its market value evaporated more than $ 67 billion. After Alphabet posted third-quarter earnings that fell short of Wall Street expectations, the company’s stock price fell another 4% on the second trading day.

Recently, Pichai’s stock price has improved after being promoted to CEO of Alphabet. Last month, Alphabet became the fourth U.S. company to reach a trillion-dollar market value in history.

In recent years, Amazon has continuously seized shopping-related advertising business from Google singers, becoming one of Alphabet’s main competitors in the digital advertising field. The e-commerce giant’s advertising business surged last year’s holiday shopping season. As advertising business expansion slows, Alphabet is looking for new sources of growth, and cloud computing is one of its main opportunities.

Of course, Google is still the leader in the digital advertising market, ahead of Facebook and Amazon, and its business is still growing. According to Mark Mahaney, an analyst at Royal Bank of Canada, Google accounts for more than 70% of global search advertising revenue. “In terms of profitability, its market share continues to increase, and its strong position and continuous innovation in the mobile field may continue to gradually expand this share in the foreseeable future,” Mahani said in the research report.

Antitrust investigation

Like the current troubles for tech giants such as Apple, Amazon and Facebook, Google is also facing a series of antitrust investigations. Regulators continue to look for evidence that Google is using its monopoly power in search, advertising and mobile to beat competitors.

It was reported last week that attorney generals of the US states will meet with officials of the Department of Justice to share information about their investigation of Google, a subsidiary of Alphabet. Their investigation revolved around Google’s monopoly, which could hurt consumers through Google’s control of the online advertising market and search traffic. It is reported that the meeting may include Google’s dominance in the field of online search, possible anti-competitive behavior in the Android mobile operating system, and how to divide labor as the investigation progresses. The source also said that to date, the US federal and state governments have not shared data from their simultaneous investigations.

Google ’s advertising business is very large. According to data provided by market research firm eMarketer, Google will reach a milestone in 2019, and its online and offline advertising revenue will account for 20% of the overall US advertising spending market %. In the US search advertising spending market, Google has occupied 74.6% share. In addition, Google is expected to lead the US digital advertising market with a total of 48.05 billion US dollars in 2019, with a share of 37.2%. eMarketer data shows that Fac is expected