Alphabet shows how her advertising company monetizes its cloud business


The hottest among the “cloud emperors” that dominated the world economy in 2021 alphabet (NASDAQ:GOOGL). GOOGL shares were the investment of the year. This is a call in which I was very much mistaken.

Source: Valeriya Zankovych /

me you have no alphabet. I have concerned about regulators. I accused him of being swollen Wall Street mode, instead as a Silicon Valley company.

Despite my protests, Alphabet shares have risen 68% this year. What was not a trillion dollars in 2020 has a market capitalization of $ 2 trillion at the end of 2021.

The profit was even strong Microsoft (NASDAQ:MSFT), increased by 53%. Amazon (NASDAQ:AMZN) is higher by 25% and Apple (NASDAQ:AAPL) increased by 21%, but remained in dust. What now Meta platform (NASDAQ:FB) increased by only 10%.

But you didn’t buy yesterday. You buy tomorrow. Analysts he monitors TipRanks see Alphabet Management Only A 14% increase, similar to Facebook, next year. Why?

GOOGL Stock is now the king of all media names

Which powered GOOGL shares in 2021 advertising. combined, Google search and YouTube ads accounted for 80% of its revenue and total net revenue in the third quarter. (Other operations, including Google Cloud, have lost money.)

Search and YouTube work symbiotically. TV ads on YouTube and in the YouTube TV Cable Swap service provide trademark messages. Search ads, especially promoted results, provide a direct response. These ads can be targeted, practically to the individual.

The force of this blow of one or two destroyed all other advertising media. Journalism in the 20thth century meant merging a place, industry, or lifestyle, and then gaining a higher price for the audience. With Alphabet, you get accurate targeting for the base level. Television is now under threat because YouTube has a lot of inventory and the search can complete the sale.

The cloud creates a mysterious sauce

Advertising is a way for Google to monetize its cloud, but the cloud remains its mysterious sauce.

The alphabet sets $ 20 billion a year to their data centers in the cloud. Cash originates from operating cash flow, $ 25.5 billion only in the third quarter.

The cloud is the one that allows Alphabet’s advertising and media dominance. It means the Android operating system that transfers the cloud directly to devices not damaged due to Apple’s recent privacy changes.

For analysts who care about the sustainability of the model, Google warns of rising revenue at Google Cloud. Google Cloud, however, continues to lose money, $ 645 million in the last quarter. It is also not gaining market share. Google Cloud’s market share remains single in the US Amazon has a third of the market thanks to seven years of progress.

Advertising allows Google to disguise the relative failure of Google Cloud. Synergy research estimates Google’s global share the cloud infrastructure market is 10%. That’s with a 12-month revenue lag for the entire market of $ 164 billion, growing by nearly 27% a year.

The growth of cloud services gives analysts confidence that Google can withstand regulatory pressure on its advertising operations. This is supported by Google, which charges for more services, including cloud storage, which costs virtually nothing. The nominal monthly subscription, customer relationship, also protects against regulators.

Bottom line

Google swallowed journalism and all of its paid content models in the first decade of the century. It is now swallowing traditional television.

It does all this while paying almost nothing except capital spending in the cloud. While Amazon, Apple, and the rest of the media industry are increasing their content budgets, Google is spending almost nothing. Instead, it brings 29% of its revenue to the net income line and grows by 47% per year in volume.

Google still does not offer dividends. Supports only stock with aggressive redemption program.

Capital gains are important and as long as redemptions continue, capital gains seem to be guaranteed.

On the day of the announcement, Dana Blankenhorn held long positions in AMZN, AAPL and MSFT. The opinions expressed in this article are those of the author who are the subject of Guidelines for publication.

Dana Blankenhorn has been a financial and technology journalist since 1978. Just in time for the holidays he has a collection of stories about COVID-19 at the Amazon Kindle store. Write to him [email protected] but tweet him on @danablankenhorn. It says Substack, Facing the future, covering technology, markets and policy.


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