Let's go over Alphabet's business model
[THREAD]
[THREAD]
1/ We'll start with its advertising revenue, which is made up of two parts:
A) Properties
- This would include Google Search and ad revenue on YouTube, Gmail, etc.
A) Properties
- This would include Google Search and ad revenue on YouTube, Gmail, etc.
2/
B) Network
- This is ad revenue from "Partners" or other websites/apps that allow Google to insert ads in
B) Network
- This is ad revenue from "Partners" or other websites/apps that allow Google to insert ads in
3/ As you can see, Properties makes up 83% of the advertising revenue
4/ Now we'll go into differences of cost structure between Properties & Network.
For Properties, Google has to pay browsers like FireFox to be the default search engine.
For Network, Google takes a cut from its partner sites.
The cost of revenue is much high on the Network.
For Properties, Google has to pay browsers like FireFox to be the default search engine.
For Network, Google takes a cut from its partner sites.
The cost of revenue is much high on the Network.
5/ The "pay-out" to distribution partners (like browsers/Apple) is about 13% of the Properties revenue whereas the pay-out to the Network is over 70%.
So, even though Properties has 4.8x the amount of revenue, Network's cost of revenue is higher.
So, even though Properties has 4.8x the amount of revenue, Network's cost of revenue is higher.
6/ Now, the final revenue segment (excluding "Moonshots") is "Other" which makes up 15% of total revenue.
Notice that Properties made up 83% of ad revenue which is 85% of total revenue. So .83*.85 is about 71% of total revenue from Properties.
Notice that Properties made up 83% of ad revenue which is 85% of total revenue. So .83*.85 is about 71% of total revenue from Properties.
7/ This "Other" revenue is made up of apps, Cloud, and Hardware.
8/ So while "Other" makes up 15% of total revenue, it is 55% of cost of revenue.
It's not broken down individually, but I'd guess that hardware and the Cloud is running at a loss to gain market share.
It's not broken down individually, but I'd guess that hardware and the Cloud is running at a loss to gain market share.
9/ So this is how the revenue segments break down:
Properties: 71%
Network: 14%
Other: 15%
And here are the segment gross margins:
Properties: 87%
Network: 29%
Other: -39%
Properties: 71%
Network: 14%
Other: 15%
And here are the segment gross margins:
Properties: 87%
Network: 29%
Other: -39%
10/ So here's a crazy stat:
Properties makes up 109% of Google's gross profit.
So to say that Google is driven by "Search" would be correct.
As you can see, Properties grew from # of clicks rather than CPC which is probably b/c YouTube is lower on a CPC basis.
Properties makes up 109% of Google's gross profit.
So to say that Google is driven by "Search" would be correct.
As you can see, Properties grew from # of clicks rather than CPC which is probably b/c YouTube is lower on a CPC basis.
Fin/ This might be a stretch b/c you can't break it out by "Property" but it seems to show how much Alphabet relies on YouTube for growth.
One would expect CPCs to increase if growth was from Search.
Therefore, a big part of the Google thesis is how well YouTube performs.
One would expect CPCs to increase if growth was from Search.
Therefore, a big part of the Google thesis is how well YouTube performs.
