Google (or Alphabet), what happened?
The company’s stock took a major hit after its Q4 earnings report, marking its largest market-cap drop ever, according to Barron’s—which, let’s be honest, is a much smarter publication than we are.
But let’s look at the numbers:
- Total Revenue: $96.5 billion, a 12% year-over-year increase, but just shy of the $96.6 billion consensus estimate.
- Google Search: Revenue grew 13% to $54 billion, driven by AI-powered features that increased user engagement.
- YouTube Ads: Revenue rose 14% to $10.5 billion, boosted by strong U.S. election spending, with combined spending from both parties nearly doubling compared to 2020.
So, what caused the stock drop? Not ad revenue, necessarily. Instead, slower cloud growth and missing top-line estimates took the wind out of Alphabet’s sails.
That said, there were some notable ad-related insights from the earnings call:
- Google Network: Ad revenue fell 4% to $8 billion, reflecting ongoing challenges.
- Search expansion: Google is now in over half of all journeys where a new brand, product, or retailer is discovered, says Google, which, obviously, is an ad opportunity.
- AI-powered ads drive better ROI: A Nielsen meta-analysis found that AI-powered video campaigns on YouTube deliver 17% higher ROAS than manual campaigns.
- Creator monetization: Advertisers can now promote YouTube creator videos across all AI-powered campaign types in Google Ads, and creators can tag brands in their videos.
- Shorts is growing on Connected TV: CTV now accounts for 15% of Shorts viewing in the U.S., signaling a shift in Shorts video consumption.
Kind of hilarious, though, that no one raised the antitrust cases on the earnings call. Would have appreciated an update, Google-Alphabet team!
Why This Matters:
Google continues to chug along. On the ads front, YouTube and Search remain the major priorities and opportunities.
Search, thanks to its newfound connection to AI, is back in the spotlight—it was mentioned over 50 times on the call, compared to YouTube (36 times) and Cloud (38 times). AI, of course, led the pack with nearly 60 mentions.
It’s a clear signal of where Google is headed: more AI to power Search, then more AI in YouTube—all interconnected (until it gets broken up, of course—just kidding!).
Experts React:
Interesting to note – AdSense revenue for Google was down:
Our Take:
We’re still waiting for a resolution on Google’s antitrust adtech case—but maybe it may not be all that bad.
Terry Kawaja, CEO and founder of adtech and media investment firm LUMA Partners, has said a Google adtech breakup could be a win for everyone, including Google. As Kawaja puts it, “guilty is good.” Spinning off its adtech business, he argues, would actually benefit the company. More on that here.
