Can Google’s Non-Advertising Revenue Streams Mitigate Impact Of Slowing Advertising Growth?
Alphabet (NASDAQ:GOOG), Google’s parent company, reported Q3 revenues recently that were ahead of consensus expectations due to the company’s growing strength in the cloud business even as some of its other bets begin paying off. While Google’s core advertising revenues have been under pressure over recent months from increased regulatory scrutiny, the company has done well to focus on growth in its non-advertising revenue streams. And we expect this trend to continue to boost Google’s top line over coming years, as we highlight in our interactive dashboard for Google’s Revenues.
In Q3, Google Cloud, Fiber and Verily drove revenues. The quarter also saw Google staking its claim to quantum supremacy. Quantum supremacy refers to the ability of a quantum computer to perform computations that traditional computers cannot. These and a string of other non-advertising offerings will be the key to Google’s growth going forward.
Google’s Business Model
- Beating S&P 500 by 37% Since The Start Of 2023, Where Is Alphabet Stock Headed?
- Beating The S&P 500 By 40% Since The Start Of 2023, What To Expect From Alphabet Stock In Q4?
- After 50% Move This Year Alphabet Stock To Outperform The Estimates In Q3
- Alphabet Stock Outperformed The Street Expectations In Q2
- What To Expect From Alphabet Stock ?
- Alphabet Stock Lost 10% In One Week, What’s Next?
What Need Does It Serve?
Google primarily makes money through online advertising, purchase of digital content on Google Play, sale of hardware and sales of cloud subscription (Google Cloud Platform and G Suite).
What Are The Alternatives?
Competitors include Facebook (advertising), Amazon (cloud, advertising), Microsoft (cloud, search, advertising, gaming, business software), IBM (cloud, computing) and Oracle (cloud, databases) among others.
Has 3 Operating Segments
- Google advertising: Segment revenues were derived from online advertising across Google’s own websites and from placement of ads across third party websites.
- Google Other: Segment revenues were derived from the sale of digital content on Google Play, hardware and sale of cloud subscription.
- Other Bets: This segment houses all of Google’s incubation projects and bets on nascent technologies.
A Quick Look At Google’s Revenues
Google’s revenue grew 51.6% over 2016 to 2018 to $136.8 bn and is expected to increase 49% to nearly $203.4 bn by 2020.
Google’s 3 divisions (1) Google Advertising Revenues, (2) Google Other Revenues and (3) Other Bets Revenues are expected to contribute $142.4 bn (83.3%), $27.9 bn (16.3%) and $0.7 bn (0.4%) respectively to the company’s 2019 revenue of $171 bn.
- Google Advertising Division revenue growth of $50 bn over the next two years is likely to be driven by greater monetization of video format ads (especially YouTube) and greater analytics driven ad targeting.
- Google Other Division revenue growth of $16.3 bn over the next two years is likely to be driven by cloud revenues.
- Other Bets Division revenue growth of $0.3 bn over the next two years is likely to be driven by newer technologies such as quantum computing and autonomous driving.
Additional details about how Google’s revenues by division have changed over the years is available in our interactive dashboard.
