Google delivered turbocharged sales growth in the past quarter, underscoring its status as the world’s most potent advertising engine. The internet giant took advantage of an uneven pandemic reopening, catering to homebound users spending more time on screens as well as consumers venturing out to shop and travel.
Second-quarter sales for Alphabet Inc., Google’s parent, surged past Wall Street estimates, due to a swell of ads from retail marketers eager to encourage consumer spending -- through e-commerce on YouTube and by physically returning to stores.
The company brought in US$61.9 billion in revenue, up from $38.3 billion in Q2 2020, and reported an operating income of $19.4 billion, up from $6.4 billion in Q2 2020.
Income (expenses) also rose to $2.6 billion, up from $1.9 billion, while net income reached $18.5 billion, up from $7 billion in 2021.
Diluted EPS for the quarter was $27.26, up from $10.13 in the same period last year.
“Our strong second quarter revenues of $61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend. Again, we benefited from excellent execution across the board by our teams,” comments Alphabet and Google chief financial officer Ruth Porat.
Alphabet, which owns and operates Google, also published additional financials related to Google’s performance.
Google advertising: Search brought in US$35.8 billion in Q2 2021, up from $21.3 billion in Q2 2020. YouTube ad revenue totalled $7 billion, up from $3.8 billion, and Google Network totalled $7.6 billion, up from $4.7 billion.
In total, Google Services brought in $57 billion, up from $35 billion for the same period last year. Google Services include ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Revenue generation comes from advertising; sales of apps, in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.
Google Cloud reported revenue of $4.6 billion, up from $3 billion for the same period last year.
Google’s total number of employees also rose from 127,498 in Q2 2020 to 144,056 in Q2 2021.
“In Q2, there was a rising tide of online activity in many parts of the world, and we’re proud that our services helped so many consumers and businesses. Our long-term investments in AI and Google Cloud are helping us drive significant improvements in everyone’s digital experience,” comments Alphabet and Google CEO Sundar Pinchai.
YouTube is a proven juggernaut
When we talk about the winners and losers in the streaming wars, the focus is primarily on the subscription services like Disney+, Netflix and HBO Max. But ever since Alphabet started breaking out YouTube's performance early last year, it's become clear it should be right there in the mix with the rest.
YouTube is not only a streaming video juggernaut that continues to report mind-bending growth, it is also turning into a key rival to the paid services that dominate the conversation around the future of television. And it has plenty of room to grow.
Take a look at some of the key points we've learned about YouTube's growth recently:
Quarterly revenue is on a par with Netflix, and it's growing at a faster rate. Alphabet said YouTube booked $7 billion in ad revenue last quarter. That's up 83% from the year-ago quarter. Compare that to the $7.34 billion in revenue Netflix booked during the same period. Netflix's revenue grew 19.4% from a year ago.
Also, practically all of Netflix's revenue comes from subscriptions. Alphabet only reports YouTube's advertising revenue, not revenue from subscription products like YouTube TV and YouTube Premium.
YouTube's television viewing is growing faster than ever. While the vast majority of YouTube consumption happens on phones, computers and tablets, Alphabet reported huge growth over the past year in people watching on television sets.
The company said 120 million people watched YouTube on a TV last month, up from 100 million per month last year. Philipp Schindler, Google's chief business officer, said on the company's earnings call Tuesday YouTube on TV is "the fastest growing consumer surface that we have."
It’s the strongest signal yet that YouTube is encroaching on Netflix (209 million subscribers as of the end of June) and Disney+’s (103.6 million subscribers as of April 3) territory in the living room.
Nielsen says more people are watching YouTube and Netflix than any other streaming service. Research firm Nielsen released a fascinating study last month showing far more people still watch traditional television than streaming video.
But Nielsen’s data also had an interesting ranking of time spent streaming on various services. YouTube and Netflix were the top two streamers, with each service accounting for 6% of time spent watching television.
YouTube’s TikTok rival is also growing. Short-form video is the dominant trend on social media today, with TikTok leading the charge. YouTube has its own short-form video service, YouTube Shorts, designed to compete with TikTok. Alphabet didn’t disclose how many people are using YouTube shorts but said viewing metrics jumped from 6.5 billion views per day in March to 15 billion views per day by the end of last quarter.
More room to grow. Nielsen’s report last month showed there’s still plenty of room for all streamers to grow as more people migrate away from traditional linear TV. Streaming is still just about a quarter of all television viewing. A rising tide lifts all boats. YouTube is poised to be one of the streaming wars winners thanks to its early lead.