Data privacy drama can’t stop Google. Ad business soars 20%

Google’s ad sales machine is still going strong even as regulators and consumers scrutinize the tech industry’s data-privacy practices.

Alphabet, the parent company of Google, said its total revenue for the final three months of 2018 was $39.3 billion, an increase of 22% from the same period a year earlier, according to a company earnings report released Monday.

The growth, which was better than expected, was fueled in large part by Google’s advertising business, which accounted for $32.6 billion of Alphabet’s overall revenue — up 20% from $27.2 billion in the year prior.

But the company is now paying more to support its advertising business. Alphabet said its traffic and acquisition cost — the money it pays to companies to run its ads and services — was $7.4 billion during the quarter, up from $6.5 billion a year ago.

Alphabet’s operating margin fell to 21% for the quarter — a noteworthy dip from 24% a year ago. On a conference call with analysts Monday after the report, Alphabet’s CFO Ruth Porat noted that the company is investing “aggressively” in technical infrastructure and engineering talent to drive future growth in areas like cloud computing.

The company added nearly 19,000 employees throughout 2018, ending the year with 98,771 employees total.

Alphabet stock fell about 3% in after-hours trading Monday following the earnings report.

The earnings report caps off what was a challenging end to 2018 for the company.

In the final three months of 2018, Google’s CEO was grilled by Congress about data privacy, its employees around the world walked out over sexual harassment scandals, and it disclosed a security bug impacting its largely forgotten social network, Google Plus.

Yet, the biggest issue for Google right now might not be regulatory risks so much as its own ongoing effort to diversify its revenue streams amid competition from other large technology companies.

Facebook and Google have been the two dominant forces in digital advertising for years, but now Amazon is quickly ramping up its own advertising business. Google also finds itself a distant third to Amazon and Microsoft in the fast-growing cloud computing market.

Google’s other revenues, which include hardware sales and cloud computing, rose to $6.5 billion for the quarter from just shy of $5 billion a year ago.

Meanwhile, the company’s ambitious moonshots factory, referred to in earnings reports as “Other bets,” has yet to create a business that makes enough money to truly move the needle for Alphabet.

The category accounted for $154 million in revenue for the quarter, up from $131 million a year ago. The revenue mainly comes from Google Fiber, a high-speed internet service, and Verily, a life sciences division, Porat said on the call.

 

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