The Alphabet share price has added 4% in early trading on Wall Street today after the Google owner posted record profits. Today’s gains will mean the Alphabet share price has leapt by almost 70% since the beginning of 2021 with revenues driven by booming business in online advertisements served via Google and YouTube.
Sales for the latest quarter to the end of September were up 41% on the same three months a year earlier. That was well ahead of already ambitious forecasts by Wall Street analysts. The runaway growth was particularly impressive against a backdrop of rivals for digital advertising spend, namely social media platforms like Facebook, Instagram and Snapchat, recently blaming Apple’s recent privacy changes for their sluggish recent growth.
Those stellar sales saw net income, profit, increase from $11.25 billion to $18.94 billion. The leap forward was attributed by Google and Alphabet’s chief financial officer Ruth Porat to “consistent investments to support long-term growth”, bearing fruit.
Mountain View, California-based Alphabet was founded in 1998 as Google, the search engine brand it is now holding company to. The near monopoly it has since built as most of the Western world’s default search engine, together with the smart addition of video streaming platform YouTube, means it makes more money from digital advertising than any other company in the world.
Apple’s updates to how digital advertisers can track iPhone users without their express consent have reduced the effectiveness of digital advertising models who can no longer target their ads as precisely.
Social media companies have felt the impact most. Google and YouTube less so because their ads are served based on the search terms users enter in their respective search engines. Their ad targeting relies mainly on the information a user is providing at that moment, whereas those served by social media platforms are more targeted based on historical user behaviour data. Apple has stopped much of that data being gatherable from users of its devices.
Social media platforms will be expected to argue that Apple’s changes to its privacy laws give a select group of rivals like Google, and Apple itself, even greater dominance of a digital advertising market that was already concentrated in the hands of a relatively small number of big tech companies.
