Google: One of the Greatest Inventions in History

Alphabet reported its 2024 third-quarter earnings on Tuesday, October 29, with EPS of $2.12, $0.28 better than the analyst estimate of $1.84. Revenue for the quarter came in at $88.27B versus the consensus estimate of $86.37B.

“Alphabet’s report confirms the overall trend that we should expect a very strong season for tech earnings. The main reason for that is the continuously evolving backdrop both on the macro and financial fronts as companies continue to price in a faster growth environment ahead, in light of a unique combination of a resilient economy with a growingly supportive monetary outlook,” said Thomas Monteiro, senior analyst at Investing.com. “This was reflected in the report in both ad and cloud business, which, combined, gives us a nice measure of what to expect from the upcoming reports this week, which is significant tailwinds gathering in the form of margin expansion. Internally, the main story here is margin expansion, which will certainly give the company more breathing room ahead for improving monetization in its fast-growing suite of AI-to-core-business integrated offerings.

“While some of these numbers certainly come from the positive seasonality, particularly with the US election driving increasing interest in YouTube and search, the stock has been fairly to under-priced amid a market that can’t seem to get enough tailwinds. This particular setup looks very positive for an overall repricing of sell-side expectations for Q4 and beyond,” he continued. “To be taken with a pinch of salt, however, is Cloud, which, despite showing significant improvement, is still to reach the type of growth that would warrant a more significant revision in expectations for the quarters ahead as the company is forced to spend progressively more in the AI arms race against a much better positioned competition for the near term. Right now, as it seems, Alphabet still has some catch-up to do against its fiercely moving peers in the segment.”

Larry Page 

• Larry Page founded the company together with Sergey Brin. Together they own about 14% of its publicly-listed shares and control 56% of the stockholder voting power through super-voting stock.
• Larry Page’s net worth in 2022 is $92.3 billion, which ranks him sixth on Forbes’s Billionaire List. He was ranked fifth on Forbes’s 400 List in 2021.
• Page and Brin invented Google’s PageRank algorithm powering the search engine.
• Page was CEO of Google until 2001 but resumed the position from 2011 to 2015, after which he became the CEO of Google’s new parent company Alphabet.
• Page is a founding investor in Planetary Resources, a space exploration company.
• Page is funding “flying car” start-ups Kitty Hawk and Opener. 
• Page has not been seen at Google’s and Alphabet’s shareholders’ meetings since Sundar Pichai became Google’s CEO.
• Page promotes clean energy. Only fuel cells and geothermal energy are used in his home in Palo Alto.
• Page is a resident of the USA and New Zealand.

Sergey Brin

• Sergey Brin and his family immigrated to the USA from the former USSR when he was six. Now he is the richest immigrant in America.
• During his first year of the Ph.D. program at Stanford University, Brin worked on inventing an algorithm for personalized film recommendations. He also looked for an algorithm to detect cases of copyright infringement.
• Brin’s projects included self-driving cars, smart contact lenses, and smart glasses.
• The Economist once called Sergey Brin the “Enlightenment Man” for his belief that science and reason would solve the world’s problems.
• In 2015, Brin moved from the “director of special projects” position at X to the presidential position at Alphabet.
• Brin is ranked seventh on Forbes’s Billionaire List. He was ranked sixth on Forbes’s 400 List in 2021. His net worth in 2022 is $88.3 billion.
• Brin stopped being president of Alphabet in 2019 but remains a controlling shareholder and a board member.
• Brin spent his time in 2019 mostly on Alphabet’s moonshot research lab X.
• Brin is funding a high-tech airship project.
• In August 2022, Brin gave away nearly $130 million worth of Google shares.

Sources: Forbes 

• In January 2022, Google had 91.9% of the search engine market share.
• Alphabet’s annual revenue in 2021 was $256.74 billion.
• Google processes over 99,000 searches every second, which amounts to 8.5 billion daily searches.
• Since its launch, the volume of searches on Google has increased by over 10% every year.
• About 35% of product searches start on Google.
• Over 60% of Google searches are done using mobile devices.
• The top search result on Google receives a 37.1% click-through rate.
• Advertisers make $8 in profit for every $1 spent on Google search ads and Google search engine results.
• About 46% of users on the Google search engine seek local information.
• Almost 86% of people use Google Maps to locate a business address.
• Every day, Google processes 15% of unique keywords that have never been searched for before.
• Google Images constitutes 20% of all search inquiries.
• Nearly 48% of consumers use voice search for general search queries.
• Only 0.78% of people click something on Google’s page two.
• India turns to Google for answers most often, boasting a staggering 94.19% of usage.
• In the USA, Google accounts for 79.8% of overall searches.
• In 2021, YouTube had more than 14 billion monthly visits.
• Only 22% of users on YouTube access the website via mobile.
• In 2021, YouTube’s total advertising revenues for the year were about $28.84 billion, nearly 46% up from 2020.
• YouTube Premium reached 50 million subscribers in 2021.
• Of the top 100 searches on YouTube, 20% are related to music.
• A person’s average session on the search engine lasts 54 seconds.

In September 2022, Alphabet (Google) has a market cap of $1.415 trillion, according to companiesmarketcap.com. This makes the company the world’s fourth most valuable company by market cap. As the table below demonstrates, Google has consistently celebrated the increase in market cap over the years. The two notable exceptions visible on this upward line were 2018 when Google’s market cap edged 0.81% lower from the previous year and the current year, which so far has a decline of 27.15% from 2021. Alphabet hit a $1 trillion market capitalization in January 2020, becoming the fourth US company to pass the milestone after Apple, Amazon, and Microsoft.

Alphabet (Google) Market Cap History from 2014 to 2022

According to the company’s latest financial report, Google’s current annual revenue is $278.13 billion, which constitutes growth of 8.33% from 2021, when the company earned $256.74 billion. The revenue for the quarter ending June 30, 2022, was $69.69 billion, a 12.61% increase year-over-year. Google’s revenue is largely constituted of advertising revenue, which amounted to $209.49 billion in 2021. Overall, Google’s annual revenue has been increasing over the years: in 2020, it was $181.69 billion, showing a 12.77% jump from 2109. In 2019, it was $160.74 billion, which constituted an 18.3% growth from 2018.

The table below reflects a general increase in Google’s annual revenue since 2014:

Alphabet (Google) Annual Revenue from 2014 to 2022 ($US billion)

More than 80% of Alphabet’s revenue is earned from Google ads, which generated $209.49 billion in 2021 and $146.92 in 2020. These high numbers are no surprise because Google has been the market leader in online advertising for over a decade. Google generates advertising revenue through its Google Ads platform. With its help, advertisers can display ads, product listings, and service offerings to people across Google’s ad network. As Google constantly improves its algorithms on the platform, more and more advertisers are drawn to it, pushing the company’s revenue higher.

Google’s total advertising revenue in the first quarter of 2022 jumped to $54.66 million, compared to $44.684 million in Q1 of 2021. According to Investing, in the second quarter of 2022, Alphabet reported revenue of $69.69 billion, 81% coming from Google’s ad business, being in line with the average expectation of $69.88 billion among investment researchers.

The fourth quarter of 2022 proved to be a disappointing exception from the general upward trend followed by the company for years. Google’s Q4 earnings report showed a drop in ad revenue, missing expectations because of challenges in the digital advertising market. Search, Google Network, and YouTube revenues slid in Q4 2022 by 3% to $59 billion.

Search advertising revenue fared better than other segments. It sank 1.6% to $42.6 billion compared to the same quarter in Q4 2021. Google Network and YouTube revenue retreated by 8.6% and 7.0%, respectively. Google Network earned $8.5 billion; in 2021, it brought in $9.3 billion. YouTube’s revenue plummeted to $8.0 billion from $8.6 billion earned in the previous year.

The growth of Google’s advertising revenue is shown in the table below:

Google Advertising Revenue ($US billion)

Sources: Statista, CNBC

Google Cloud, also referred to as Google Cloud Platform or GCP, provides computing resources for developing, deploying, and operating applications on the internet. It is largely a service for building and maintaining original applications. These applications may then be published via the Web from its hyper-scale data center facilities. Recently, Alphabet has heavily invested in Google Cloud intending to catch up with AWS and Microsoft Azure because in 2020, its share of worldwide cloud-related revenue, among the leading service providers, was only at around 9%. In 2021, Google’s incumbent CEO, Sundar Pichai, said: “We continue to invest strongly in the business, given the momentum we are seeing.”

Although the results have been mixed, with Google still commanding only 8% of the Cloud Service Market in 2022, GCP does show a steady increase in earnings every year. In the first quarter of 2022, the segment brought Alphabet $5.8 billion. In Q2, Google Cloud contributed $6.3 billion to the company’s revenue.

In the fourth quarter of 2022, Google Cloud brought the company $7.32 billion. Although this figure showed an increase of 32% from the previous year, it still did not live up to analysts’ expectations. They foresaw $7.43 billion earned in this unit. Google Cloud also cut its losses in Q4, reducing them to $480 million from $890 million a year ago.

The increase in Google Cloud’s earnings is reflected in the table below:

Global Google Cloud Revenues from 2017 to 2022 ($US billion)

YouTube was launched in 2005 by three PayPal employees, Chad Hurley, Steve Chen, and Jawed Karim. A year later, Google acquired the start-up for $1.65 billion. Now, this move is considered the smartest acquisition of the past two decades. YouTube presently hosts 51 million channels with millions of subscribers on every topic under the sun. After its inception, the platform started the YouTube Premium initiative to allow people to listen to YouTube music without interruption from ads. YouTube Premium reached 30 million subscribers in 2020. There are also live-streaming videos on YouTube, and Shorts, a shorter version of videos similar to the format used on the TikTok platform. Analysts deem the introduction of Shorts a smart decision: TikTok might be dwarfed by a much larger audience watching YouTube videos if YouTube short videos catch on. 

YouTube has reported more than 30% revenue growth in the past four years. It generated $28.8 billion in 2021, which constituted a 46.2% jump from 2020 figures. In the first quarter of 2022, YouTube brought Alphabet $6.869 billion. In the second quarter of 2022, the revenue earned from YouTube soared to $7.340 billion. YouTube brings such good profits and enjoys such extraordinary popularity worldwide that analysts from Venture Beat estimate that if it were separated from Alphabet, it would be worth between $140 and $300 billion.

As TikTok’s popularity grew, that of YouTube started waning because people preferred shorter videos. The results of the fourth quarter of 2022 bore out YouTube’s relative fall from grace. Its revenue dipped below analysts’ predictions to reach $7.96 billion. It decreased by 8% from $8.63 billion earned last year. In addition to cut-throat competition with TikTok, there was also a pullback in ad spending in 2022, which contributed to YouTube’s lesser popularity in the last two quarters of 2022.

Analysts’ outlook on YouTube’s performance is pessimistic. They fear a decline in ad revenue could prevent YouTube from reaching its target audience and rain on the parade of advertising campaigns, rendering them less effective. Receiving less money from advertising, Google could also decide to invest less in the innovation of YouTube and thus set it up to lose alongside other advertising platforms.

Observe the upward trajectory of YouTube’s annual revenue from 2010 to 2022 in the table below:

YouTube Annual Revenue from 2010 to 2022 ($US billion)

In 2022, YouTube welcomed 2.6 billion active users. A large number of users makes YouTube one of the most popular apps in the world, behind only Google and Facebook in total usage.  On average, people worldwide watch 5 billion videos per day, which amounts to 1 billion collective hours spent on YouTube. Individually, viewers spend about 14 minutes watching YouTube videos every day, although an average viewing session on mobile devices lasts longer, about 40 minutes. The growing popularity of the YouTube platform worldwide is demonstrated in the following table:

YouTube Annual Users (in billions)

In 2022, India emerged as the country whose citizens are fonder of YouTube than other people on the planet. Statista estimates that India has the largest YouTube audience: about 467 million viewers in the country click “Play” on this platform. The popularity of the social video platform is also wide in the United States. Around 247 million Americans engage with its content. Indonesia is ranked third, with 139 million people watching videos on YouTube.

See the popularity of YouTube presented by countries in descending order in the table below:

YouTube Audience’s Size by Countries as of January 2023 (in millions)

There is no denying that 2022 was less successful for Alphabet (Google) than previous years. Shares of the tech titan plummeted nearly 40%. Yet analysts observe that the company’s performance was not as disappointing as the market saw it. They maintain that accomplishing results similar to those seen in 2021 when the world was in lockdown and relied on Google more than usual was unrealistic in 2022. Comparing the company’s achievements to those of the previous year is unfair. Far from losing strength, Alphabet still has room to grow in the following year.

Google and YouTube faced new challenges in 2022. But throughout the year, the company actively worked on improving artificial intelligence supporting its search engine. Web searches on Google now can deliver even more relevant results and potentially turn Google into an even more effective marketing tool for advertisers. The company’s improvements in its search-oriented AI have upgraded Google’s shopping platform. Now it can suggest purchases to customers, help them visually immerse in a shopping process, and enhance their online shopping experience.

Alphabet also worked on improving its YouTube platform in 2022. Forced to compete with TikTok, whose brief content proved immensely popular, Alphabet introduced the monetization of shorter videos, called “shorts,” which were disallowed to generate revenue earlier. As people can now post more short videos preferred by viewers, they will attract more advertisers and lure the watching public away from the TikTok platform.

Other core improvements have been made in 2022 that will help Alphabet rise in 2023 and turn its performance into an unqualified success.

Google is not the only search engine existing in the world. There are such alternative platforms as DuckDuckGo, Bing, Yahoo!, Baidu, and Yandex, but the majority of people in the world are not even aware of their existence. Or even if they know about Yahoo! and Bing, people still turn to Google when they are searching for something on the internet. After all, Google does have 92% of the search engine market share worldwide, alongside all these platforms.

The unpopularity of the alternative search engines eloquently testifies to Google’s power. Google has the capacity to calculate a website’s relevance according to the number of pages and links pointing back to the original site, which none of the others boast. This makes Google the preferred search engine in the world. Combined with the success of other companies united under the management of Alphabet, Google’s prospects seem upbeat, despite its stock’s present slight decline.

Although algorithm forecaster Wallet Investor predicts that GOOGL’s price will slide to $61.376 in 2024, analysts from AI Pickup see Alphabet stock rebounding in 2027 to $132.86 and $311.66 by 2030. But as Google is always focused on innovations, by the time we arrive at the end of the decade, the world might be transformed again by Google’s bright ideas, just as it was forever changed by its revolutionary invention of a search engine algorithm.