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Google Parent Alphabet's Shares Fall After Company Discloses YouTube Ad Revenue

© REUTERS / Arnd WiegmannAn illuminated Google logo inside an office building in Zurich, Switzerland, December 5, 2018
An illuminated Google logo inside an office building in Zurich, Switzerland, December 5, 2018 - Sputnik International
Google-parent Alphabet’s worst fourth-quarter revenue growth since 2015 sent shares down nearly 5% on Monday, after the company debuted YouTube’s advertising revenue.

Revenue from Google’s cloud service rose 53% to $2.6 billion in the quarter and advertising on YouTube rose 31% to $4.7 billion. YouTube had generated about $750 million in subscription and other non-advertising revenue, Alphabet CEO Sundar Pichai said on Monday, cited by Reuters. Pichai added that YouTube had 20 million paid subscribers for YouTube’s Music and Premium packages and separately had two million paid subscribers for its TV service.

Overall Google ad sales were $37.93 billion, up 16.7% from the same period last year, while Google’s “other” revenue bucket including app store purchases and cloud computing deals rose 21.6% to $7.88 billion.

“The stock was priced for perfection, and a top-line miss was enough to send it lower,” said Michael Pachter, analyst at Wedbush Securities. “YouTube was impressive at $15 billion for the year, Cloud less so at $8.9 billion.”

However, other analysts considered YouTube’s ad revenue as underwhelming, leading to the fall of the company’s shares.

“YouTube is smaller than generally assumed, but on the flipside, search seems to have accelerated and is growing faster than feared,” said James Cordwell, analyst at Atlantic Equities.

The numbers come as Alphabet had increased its expenses with the hiring of thousands of salespeople, building of new data centers and marketing the Google brand through hardware and other ventures: the total cost and expenses rose 18.5% from a year ago to $36.809 billion.

Google’s internal challenges had also contributed to the fall: the company’s employees had expressed frustration with curbs on company-wide discussions and what they have described as retaliation for labor organizing. The curbs came as Pichai gained the additional role of Alphabet CEO from Larry Page, as he and fellow co-founder Sergey Brin distanced themselves from management.  Pichai told analysts on Monday his investment approach would be similar to that of his predecessors.

The Chinese coronavirus also contributed to the fall, as the company said last week it is temporarily shutting down all its offices in mainland China, Hong Kong and Taiwan. Alphabet Chief Financial Officer Ruth Porat said the outbreak of coronavirus could affect the company’s hardware business if it leads to protracted work stoppages in Asia. While many Google apps are blocked in China, Chinese advertisers still spend billions of dollars annually on Google ads to reach customers abroad.

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