Alphabet Revenue Grows 41% in 2021, Buoyed Once Again by Search Ads

Despite continued regulatory scrutiny and mixed reactions to its new targeting solution, Google parent Alphabet continued to post double digit increases in revenue, beating Wall Street expectations. 2021 revenue was $257.6 billion, a huge 41% increase from 2020, a year when the pandemic slowed down the digital advertising market (year-over year revenue growth in 2020, by comparison, was only 13%). Focusing on just the fourth quarter of 2021, revenue grew 32% to $75.3 billion, a more muted rise than the third quarter, when revenue rose 41%. What You Need to Prepare for the Google Page Experience Update in 2022 Ad sales, which continues to make up more than 80% of the company’s revenue, was $61.2 billion in the fourth quarter of 2021, compared to $46.2 billion in the year-prior period. Revenue from search grew the quickest of any advertising unit – up by 36% -- while the Google Network and YouTube ads each grew by around 25%. YouTube contributed $8.6 billion in revenue in the fourth quarter of 2021. In the earnings call following the report, CEO Sundar Pichai highlighted the company’s investment in the creator economy, noting that the number of creators earning more than $10,000 off YouTube increased 40%. Alphabet executives also discussed growth in sports, gaming, learning and podcast content categories on YouTube, and piloting new social shopping programs. Despite these investments, YouTube announced it was exiting the original content business on January 18. Chief Business Officer Philipp Schindler noted that CTV is the company’s fastest growing screen. Even with the massive earnings, the company faces three separate antitrust lawsuits – two focused on its search business from the Department of Justice and a group of State Attorneys’ General, respectively, and a third focused on the company’s dominance in the ad tech market. Last month, unredacted parts of this third suit brought forward new allegations about several ways Google manipulated ad auctions to harm advertisers, publishers and other ad tech providers. Google has denied the allegations. The Department of Justice may file its own ad tech antitrust lawsuit, as reported in multiple outlets. Analysts on the call did not inquire about any of the antitrust threat. In addition to the litigation, there is increased scrutiny on digital consumer privacy that could impact Google. The expanded California Consumer Privacy Act (CCPA) goes into effect next year and the federal Banning Surveillance Advertising Act was introduced late last month in Congress. Against new privacy legislation, Google is working to create solutions to replace the third-party cookies --- last week it introduced a contextual-targeting option Topics, replacing an earlier solution Flocs, which provide greater privacy protection but gives advertisers less precision. “It is important technology is beneficial to society. We have called for privacy regulations,” Pichai said in response to a question about lawmakers moves. Pichai said the proposed legislation doesn’t address the real issues at play and could weaken Alphabet’s products which, Pichai argues, put user privacy at the fore. Federal Privacy Laws, Big Tech Regulation and Other Questions Shaping the Year Ahead

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Alphabet Revenue Grows 41% in 2021, Buoyed Once Again by Search Ads

Growth in CTV, gaming and privacy legislation

Catherine Perloff

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Catherine Perloff