Google ad revenue crosses $50 billion in Q2

Alphabet, the parent company of Google and YouTube, reported a strong set of numbers for the second quarter of its financial year. Google's ad revenues soared past the $50 billion mark in the period, versus a shade under $30 billion in the corresponding period last year. YouTube also saw its ad sales hit $7 billion, as YouTube Shorts, the company's TikTok rival, crossed 15 billion daily views in June, more than double the previous quarter. 

As the gloom in the business environment lifted, Alphabet's overall performance was strong. It reported a 62% increase in topline to $61.9 billion, compared to $38.2 billion a year ago. The company's operating profit also grew, by 31% to $19.3 billion. A significant turnaround was seen in some categories such as the cloud business, which narrowed its losses from $1.43 billion to $541 billion in Q2 this year.  

“Our strong second quarter revenues of $61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend," said Ruth Porat, CFO of Google and Alphabet. CEO Sundar Pichai added that “In Q2, there was a rising tide of online activity in many parts of the world. ... Our long-term investments in AI and GoogleCloud are helping us drive significant improvements in everyone’s digital experience.”

In terms of its geographic split, Alphabet's Other Americas revenue grew the fastest at 83%, reaching $3.2 billion. However, North America (up 57% YOY) and Europe (53%) remained the largest revenue generators. APAC's revenue was $10.8 billion, up 62%. 

Alphabet's boost in advertising revenue has been catalysed by its increased focus on connected TVs and driving traffic towards nonlinear TV sources. "The global shift to online video and streaming continues with over ... 2 billion monthly active users now, 1 billion-plus hours of video watched every day. I think we're at the forefront of this shift," contended Philipp Schindler, Alphabet's chief business officer, in his post-earnings call with analysts.

Connected TVs are an integral part of this shift, he added. "It is really the fastest growing consumer surface that we have, and that growth started before the pandemic and has frankly solidified since," he said. " We have over 120 million people who watch YouTube on TVs every month, and that's up from 100 million last year."

Alphabet executives on an analyst call provided more context on the strong growth in connected TVs. "We are working not only with TV providers globally, we are doing it with cable box manufacturers, as well as we supplemented with Google TV with Chromecast as well," CEO Pichai said on the firm's investments in this space. "So it's a significant investment from our side, making sure we can drive that shift, and obviously it adds a lot of synergies for us in terms of being able to bring our services to our users. 

This investment, added Schindler, Alphabet's chief business officer, will help the company not just tap above-the-line marketing budgets, but also access below-the-line budgets. "And, sure, we've seen COVID accelerate the shift to ecommerce at an astounding rate, but keep also in mind, 80% of commerce still remains offline," he added. "So there's a lot of room for digital to play a bigger role, and we think we can tap into other budgets that were traditionally used for, let's say, local advertising to derive sales."

Alphabet's CFO Porat observed that this year's metrics were boosted by a 4% tailwind in foreign currency rates, and she forecast a more muted performance in Q3. "In the second quarter, we continued to benefit from elevated consumer online activity and broad-based strength in advertiser spend," she told analysts. "We believe it is still too early to forecast the longer-term trends as markets reopen, especially, given the recent increase in COVID cases globally."