Google Search business booms on Covid reopening marketing blitz
Google’s results, showing a surge in ad sales related to travel and retail, offered a glimpse of online spending in a post-pandemic world: Businesses are boosting digital marketing to capture a public eager to resume something resembling normal life again.
Google parent Alphabet Inc. said first-quarter revenue, excluding payments to distribution partners, came in at $45.6 billion, pummeling Wall Street estimates. The company also unveiled a big new share buyback, sending the stock up more than 4% in extended trading.
Covid-19 restrictions have limited travel and trips to physical stores, two key areas of Google’s search business. However, Alphabet shares are up more than 30% this year on optimism vaccinations in the U.S. are reviving these activities. The company is also pushing further into e-commerce, but still lags behind rival Amazon.com Inc.
While most major tech companies thrived during the pandemic, Alphabet’s performance was uneven. YouTube ad revenue boomed as people were stuck at home looking to relieve boredom by watching videos online. Google’s cloud-computing business also grew quickly on a spike in demand for internet-based services from remote workers. However, the online search engine dwarfs these other operations and it suffered from a slump in commercial queries for things like flights and hotels.
Now, with more than 1 billion Covid-19 vaccine shots given, according to Bloomberg’s vaccine tracker, consumers have started to venture out to restaurants, shops and even vacation destinations -- and they often interact with Google services and ads before they do.
Ruth Porat, chief financial officer, said the results “reflect elevated consumer activity online and broad based growth in advertiser revenue.”
During a conference call with analysts, Porat said it’s unclear how “durable” the recent change in consumer behavior will be, because it will depend on the global pace of the Covid-19 recovery.
The Alphabet board authorized the company to repurchase up to an additional $50 billion of its Class C capital stock. The shares climbed 4.2% in extended trading, after closing at $2,290.98 in New York earlier on Tuesday. That puts the stock on course for another record on Wednesday and values the company at more than $1.5 trillion.
Chief Executive Officer Sundar Pichai is trying to expand beyond the advertising engine that generates most of Alphabet’s revenue, while contending with a regulatory backlash that includes three government antitrust suits targeting different parts of its business in the U.S. He’s also preparing to bring employees back to the office in September.
Search and other related businesses generated sales of $31.9 billion in the first quarter. Wall Street estimated $29.9 billion.
YouTube ad revenue surged 49% to $6 billion. Analysts were looking for $5.7 billion. YouTube Shorts, its competitor to TikTok, logged 6.5 billion daily views as of March, up from 3.5 billion at the end of 2020.
The company’s cloud division, led by Thomas Kurian, is wooing corporations and other large customers in a bid to catch market leaders Amazon.com Inc. and Microsoft Corp. Google Cloud revenue jumped to $4 billion, in line with Wall Street expectations.
Executives said the Google Play store, YouTube’s non-ad revenue and consumer hardware were the top drivers of growth in the “Google Other” category.
Alphabet’s Other Bets, such as autonomous vehicles and delivery drones, generated revenue of $198 million. That division lost $1.15 billion.
Alphabet overall generated $17.9 billion of net income, or $26.29 a share, in the most recent quarter, compared with $6.8 billion, or $9.87 a share, a year earlier.