Google's results of ad revenue up 15% year-over-year is impressive given the pullback in ad spending.
To put it into perspective, over the past 4 years Google has grown ad revenue in the 20-24% range. This quarter is not that far off of the historical performance.
CFO Ruth Porat notes there was a significant slowdown in the month of March. Our initial math suggests revenue was flat year-over-year in the final 3 weeks of the quarter. Not bad all things considered.
Another positive sign, Google revenue in key segments stable.
YouTube (11% of sales) was up 33% y/y, up from 31% last quarter. This means the company is gaining share in online ads. Facebook grew at 25% in Dec-19 as a point of reference.
Cloud (8% of sales) was up 52% y/y, in line with last quarters' 53% growth. Amazon's AWS is a 3x bigger business and grew at 34% in Dec-19.
When it comes to recovery, CEO Ruth Porat stated that they are beginning to see early signs that user behavior is returning to normal, although it’s still too early to tell how durable this will be.
The good news is that Google has an amazing, sustainable ad business that’s a fabric of our lives. The bad news is that post-pandemic, we believe the top-performing companies will be doing more in more work from home, healthcare, wearables, augmented reality, and mobility.
While Google’s Cloud benefits from some of these future themes, its only 8% of the business today.
It’s important to note, the company does have shots at these important future drivers within other bets.
It’s important to note, the company does have shots at these important future drivers within other bets.
Google's other bets include: Waymo (autonomy that just raised $2.5B) Wing Aviation (drone delivery), Makani (renewable energy from wind), Verily and Calico (health).
The case of Google future rests in other bets, funded in the near term by an incredible ad business.
