Google owner Alphabet sees record growth as ad spend soars

Google parent Alphabet saw record revenues for the second straight quarter despite the pandemic as advertisers unleashed spending during the holidays.

Cutbacks by travel and entertainment advertisers were more than offset by new spending from online retail clients and others during lockdown.

Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s $56.9bn in fourth-quarter sales, up 23% compared with a year ago.

The Cloud unit also saw strong growth.

Google Cloud sales were $3.83bn, or $13.1bn for the full year, up 46% from 2019. In a new disclosure, Alphabet said Google Cloud posted an operating loss of $1.24bn in the fourth quarter and $5.6bn for 2020, a 21% wider loss than in 2019.

Google, which generates more revenue from internet advertising than any company globally, has long faced questions over whether it can spin the cash from its advertising business into a newly profitable venture. The new financial details suggest that goal still may be years away.

Alphabet’s quarterly profit rose 43% to $15.2bn, sending shares up 6% to $2,036 in after-hours trading on Wall Street. The stock has risen by 9.5% so far this year.

Christopher Rossbach, of asset management company J. Stern & Co, said: “Alphabet’s results show that there is still a massive shift to online advertising.

“Both Alphabet and Facebook have reported strong online advertising growth this quarter as advertisers are drawn to the better targeting, measurement, reach and ultimately return during the pandemic.”

He added that “the results are evidence of the strength of Google’s business model and its resilience in a time of crisis… The company is well on its way to a $2tn market cap”.

Even so, Google’s lead over the global internet advertising market is shrinking as Amazon.com becomes a bigger threat and China-focused vendors such as Alibaba enjoy a faster rebound from the pandemic.

Last week, research company eMarketer estimated Google will capture 30% of the market in 2021. – bbc.com