Pandemic Is Accelerating Google's Rivalry With Amazon and Traditional TV

Despite a year that saw it contend with the disruption caused by a global pandemic, threats from regulators and the challenge of leading the online ad industry toward a cookieless future, Google still managed to earn handsome revenues in 2020. Earlier today Google posted performance figures that demonstrate its growing competition with both Amazon and traditional media players, particularly those in the TV sector. Parent company Alphabet posted revenues of $56.9 billion for the final quarter of 2020, amounting to a 23% year-over-year rise with total earnings for the fiscal year coming in at $183 billion as Google saw ad spend increase after an earlier blip in the year. The company also broke down the performance of its major individual ad offerings, which garnered a total of $42.6 billion in revenue during the three months to Dec. 31, 2020, up from $37.9 billion the year beforehand, which demonstrate that Search Ads still generate the bulk of its earnings. Google Search ads generated $31.9 billion, up 17% YouTube ads generated $6.9 billion, up 46% Google Network Members' properties generated $7.4 billion, up 23% Google's advertising revenue is grouped within its Services, with the company also breaking out Google Cloud revenues—$3.8 billion in Q4, and $13.1 billion in 2020—for the first time. Sundar Pichai, CEO of Alphabet and Google emphasized that such services have helped small businesses throughout the Covid-19 pandemic. Additionally, Pichai teased upcoming announcements to the Google News Initiative, a project that has seen it partner with 450 news publishers in an attempt to better relations with legacy media players, plus inhibit unwanted further government scrutiny. In a statement, Alphabet and Google CFO Ruth Porat also noted how Google's growth in the second half of the year (it posted its first-ever revenue decline in Q2 amid a global hiatus in ad spend) was generated mainly by an increase in brand advertisers' spending on YouTube, with retailers generating much of this demand. Additionally, CPGs, entertainment and tech companies were eager to use the online ad giant's search ad offerings to cash-in on the global shift toward ecommerce, which boomed as the global pandemic helped its bounce-back. Philipp Schindler, Google CBO, added in the earnings call, "In the fourth quarter retail was the largest contributor to the year on year growth for ads. … YouTube direct response [spend] had a substantial revenue growth throughout the entire year, including the fourth quarter, after a substantial pullback at the outset of the pandemic." The results demonstrate how the economic impact of the global pandemic and the subsequent shift in consumer behaviors is spurring competition between rival Big Tech players and accelerating a clash between old and new media players. Fielding questions from equities analysts, Schindler described how Google is "rapidly evolving our commerce strategy." In a statement that underlined his company's growing rivalry with the world's largest ecommerce player, Amazon, he noted that it grew its "merchant community" by more than 80% in 2020. "We've long said that we want to make Google the best place for users to start their shopping journey," he added. "We also want to make Google the best place for merchants to connect with users, regardless of whether the transaction happens on our platform or theirs." Fielding questions from financial analysts, he also revealed some statistics demonstrating how YouTube ad formats are increasingly appealing to marketers that want to use the platform for hybrid ad campaigns that both offer brand awareness functions—traditionally the domain of premium TV slots—and potentially lead to direct sales. "The direct response business was practically nonexistent three years ago on YouTube," he said. "Now, the largest and fastest-growing ad offerings on YouTube is TrueView for Action. … 60% of TrueView for Action customers are new to YouTube," he said, adding that "70% of viewers are saying they bought a brand as a result of seeing it on YouTube."