Google’s parent company, Alphabet, more than doubled its profits to a record $17.9bn (£12.9bn) in the first quarter, as the lockdown-enforced surge in the use of digital services fuels an advertising boom for the Silicon Valley giant.
The company, which revealed in filings last week that Google UK’s staff earned an average of £240,000 each last year, said it was “still scratching the surface” over how much money it could make from advertising on its YouTube video service.
In total four-fifths of Alphabet’s $55bn in total revenues came from digital advertising, including another $6bn from Google’s ad network.
The performance smashed Wall Street’s expectations, with profits jumping 162% year on year as total revenues climbed by a third to $55.3bn, prompting investors to push Alphabet’s market value above $1.6tn for the first time.
Only Apple, Microsoft and Amazon are more valuable than Alphabet, which controls the world’s largest advertising business through its dominance of internet search and YouTube.
“Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained,” said Sundar Pichai, Alphabet’s chief executive.
Advertisers clamoured to target consumers online with advertising revenue at Google’s search business, which continues to dominate rivals globally, rising by 30% to $31.9bn. Advertising revenues at YouTube, the world’s most popular video-sharing site, surged 49% to $6bn.
“While famous for its startup culture and offices, this tech giant is, rather unspectacularly, an advertising business,” said Sophie Lund-Yates, an equity analyst at the investment firm Hargreaves Lansdown. “Covid means phenomenal sums of money have shifted to online shopping, so Alphabet’s family of digital advertising businesses have seen revenue skyrocket. An increased reliance on digital, rather than physical, activity is not something that’s likely to dissipate either. Alphabet is in a great spot at the top of the digital food chain.”
The performance boom prompted Alphabet to announce a $50bn share buyback, double the scale of its last scheme in 2019.
Google continues to diversify its business, with its cloud computing division reporting a 46% rise in sales to $4.05bn. Google Cloud, which halved losses year on year to just under $1bn in the first quarter, aims to become a third global player in the sector after Microsoft Azure and Amazon Web Services.
Google’s Other Bets category, home to businesses and ventures such as the driverless car business Waymo, the life sciences researcher Verily and its “moonshot factory” X, reported a 47% increase in revenues to $198m. Losses at the division inched higher to $1.14bn in the quarter. Alphabet’s corporate costs rose 37.5% to $990m.
Pichai said Alphabet, which employed 140,000 staff as at the end of March, intended to invest more than $7bn in offices and datacentres in the US this year to create “at least 10,000 new full-time jobs”.
Google continues to face fallout from a spate of controversies – including federal inquiries and allegations of anticompetitive business practices and issues with diversity and discrimination.
In October, the company was hit with landmark civil antitrust lawsuits brought by the US Department of Justice and a coalition of states, which allege Google maintained “monopolies through anticompetitive and exclusionary practices in the search and search advertising markets”.
In February, the company announced Google would pay a $2.6m settlement to more than 5,500 employees and applicants who had allegedly been subject to discrimination as female engineers or Asians, in California and Washington state.
The company has also had to address internal turmoil over its scientific ethics, after coming under fire for how managers review Google’s scientists’ work. In December, Timnit Gebru, a prominent black scientist, wrote on Twitter that she was fired by Google after she pushed back against the company for trying to suppress her research on the ethics of artificial intelligence. Within months, another member of Gebru’s AI ethics team was let go, escalating the issue.
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Executives have also had to make regular appearances on Capitol Hill, and have been called to testify in front of the Senate judiciary antitrust subcommittee.
Last week, a number of smaller apps, including Spotify, Tile and Match, told legislators that Google and Apple “hold data hostage” to stifle their competition. Senator Amy Klobuchar, the Democratic chair of the subcommittee, agreed and said the tech companies “exclude or suppress apps that compete with their own products” and “charge excessive fees that affect competition”.
She said: “The only way apps can get to consumers is through one of these two platforms, which are owned by just two companies. The best thing to do here would be to admit that we have a huge monopoly problem across the board, and put in some stiffer rules and standards to address it.”