Google is the world's most powerful technology company, wholly dominating the connected environment, not just in search but also, via YouTube, in video sharing and, through Android, in mobile communications. Its main global challenger is probably Facebook, but for now Google remains comfortably ahead. The company has two missions in life: firstly to "organise the world's information and make it universally accessible" and more recently "to develop services that significantly improve the lives of as many people as possible". To that end it has built upon its core offering to spin out a kaleidoscope of additional services, ranging from global mapping and mobile software to what it calls "other bets" such as healthcare research, driverless cars and even balloon-powered internet in rural Africa. To support its diversification and perhaps also blur a little of the relentless focus on its core search business, it created new umbrella company Alphabet Inc in 2015. Yet it is Google which still generates all but a tiny proportion of corporate revenues. Uniquely, for now at least, virtually all its add-ons are free to use, paid for by the awe-inspiring success of the company's advertising programme. The search business rakes in more than 40% of all global digital advertising expenditure. Yet Google's position at the top of the digital advertising tree is under threat from Facebook (20% and rising of online adex) and even increasingly from Amazon. Google has attempted to broaden its reach by moving into hardware - primarily mobile handsets and Chromebook PCs - but results have been patchy. In 2011, it took steps to monetise Android by acquiring one of its first licensors, US handset manufacturer Motorola, but that experiment failed and the business was sold on two years to Lenovo of China. More recently it acquired a large chunk of contract manufacturer HTC, makers of its Nexus and Pixel handsets, to bring handset development inhouse again, but market share is tiny compared to Samsung and Apple. A big push into self-driving cars through "other bet" Waymo holds more promise, but it's still early days and this too is an increasingly crowded sector with many deep-pocketed companies jostling for a share of the market. Another small but interesting sideline is the Nest home automation business, acquired in 2017. But for now search advertising still dominates Alphabet's business model. Group revenues continues to grow strongly, but the percentage growth has been steadily slowing. For 2019, revenues were up 18% to $161.9bn (after a 24% increase the year before). More than 83% of that total came from advertising: $134.8bn. After more than doubling in 2018, net income rose by just 17% to $34.3bn. Founders Sergey Brin and Larry Page continue to hold majority control of the business, but they surrendered executive management of the business at the end of 2019 to Sundar Pichai, now group CEO.
Capsule checked 29th June 2019
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Adbrands Daily Update 4th Feb 2020: Coming the in the wake of strong numbers from tech rivals Facebook, Amazon and Apple, Alphabet's 4Q and full year figures were slightly underwhelming. For the final quarter, revenues and operating profits were both below analysts' expectations. Full year revenues were up 18% to $161.9bn (after a 24% increase the year before). More than 83% of that total came from advertising: $134.8bn. After more than doubling in 2018, net income rose by just 17% to $34.3bn. The big news this session was that Alphabet disclosed for the first time how much money YouTube and its cloud business generates. The video streaming service had ad revenues of $15.1bn, up more than a third year-on-year. That's slightly lower than analysts had been estimating, equivalent to less than $8 for each of YouTube's 2bn users, and most of the money is paid out to video creators. Subscriptions to YouTube's ad-free services generated another $3bn. Google Cloud had sales of almost $9bn, up 53%.
Adbrands Daily Update 17th Jan 2020: Alphabet this week became only the 4th American company ever to surpass a valuation of $1 trillion, joining an exclusive club whose only other US-based members are Apple, Microsoft and Amazon. The latter surpassed $1tn in 2018, but has since fallen back below the threshold. Apple and Microsoft are currently valued at around $1.4bn and $1.3bn respectively.
Adbrands Daily Update 16th Dec 2019: "A Year in Search 2019". To be honest, the Adbrands team have never been big fans of superheroes (or at least not since we were 10), and the Marvel fan-wave leaves us cold. But we acknowledge their current popularity, and Google's annual review of a Year in Search kind of points to a reason why. It's also a pognant reminder that fictional superheroes can't ever compete with the actions of real-life giants who overcome the hurdles life throws at them to achieve great things. Google's review is heavily (if not entirely) biased towards American news and events, but still has a strong emotional charge for all viewers (even if we might not recognise all of the US citizens featured).
Adbrands Daily Update 4th Dec 2019: Google founders Larry Page and Sergey Brin are stepping back from day-to-day management of parent group Alphabet. They will remain as non-executive directors, as well as controlling shareholders, but Page will hand over the role of group CEO to Sundar Pichai, previously head of the main Google search division. "While it has been a tremendous privilege to be deeply involved in the day-to-day management of the company for so long," they wrote in a joint letter to staff, "we believe it's time to assume the role of proud parents. We plan to continue talking with Sundar regularly, especially on topics we're passionate about... offering advice and love, but not daily nagging!" The WSJ suggests that the change also points to a retreat from Alphabet's more experimental stance, shifting "the focus back on the company's advertising profit machine and away from its 'moonshots' and other potential new businesses".
Adbrands Daily Update 22nd Nov 2019: "Stadia Official Launch". Feel like having your mind blown? LA indie Omelet is behind the launch ad for Google's new online gaming platform Stadia, delivering a spectacular two-minute film that is, in all senses of the phrase, truly out there. Comedian/musician Reggie Watts is the front man for what is shaping up to be a real challenger to traditional platforms, especially once 5G becomes more widely available. "The creative idea leans into the notion that for most people, the idea of playing high quality games without a console is unheard of," says Omelet's creative director Josh Smutko. "The concept captures the impossibility and wonder of the product, expressing the freedom that comes with being able to go right to your games, wherever you are."
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