Big Tech companies continue to lap up huge amounts of money from advertisers as consumers spend more time online. That’s great news for their bottom lines, but could draw the attention of regulators.
Blockbuster results from Google parent Alphabet show that Silicon Valley’s dominance in advertising is only strengthening.
The company posted revenue of more than $55 billion for the first quarter, up 34% from one year ago, when the pandemic sent the ads business diving. Chief Financial Officer Ruth Porat cited “elevated consumer activity online and broad based growth in advertiser revenue.” Shares are up 5% in premarket trading.
Google’s advertising revenue rose 32% compared to the same period in 2020 as companies prepared for a burst of post-pandemic economic activity. YouTube ads generated $6 billion in revenue, a 49% increase.
“Covid means phenomenal sums of money have shifted to online shopping, so Alphabet’s impenetrable family of digital advertising businesses have seen revenue skyrocket,” said Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.
Google’s power within the internet ecosystem is under the microscope from regulators around the world. Results like this may only increase scrutiny, especially since it’s part of a long-term trend.
“An increased reliance on digital rather than physical activity is not something that’s going to dissipate,” Lund-Yates said. “Regulators are watching Alphabet like a hawk, and it’s a matter of when, not if, they swoop again.”
Google faces three antitrust lawsuits from the US government and state attorneys general, and is under pressure to cut deals with publishers that have seen their ad revenue decline thanks in part to the search giant.
Companies like Google also have to contend with fierce debates about internet privacy and tracking users. This week, Apple rolled out a major privacy feature designed to increase control over personal data. It’s expected to usher in a wave of privacy awareness, especially as permission requests start coming in from apps people never thought were tracking them.
Google has revealed plans to eliminate third-party cookies on its Chrome browser, and said earlier this year that it won’t introduce an alternative to track individuals across the web.
In the meantime, ad revenue is growing spectacularly. Facebook, which posts results after markets close on Wednesday, and Amazon, which follows Thursday, are also expected to reap the benefits.
Amazon is increasingly flexing its muscle when it comes to online ads.
The company’s US ad revenues last year grew to nearly $16 billion, increasing its market share from less than 8% in 2019 to more than 10% in 2020, according to eMarketer. The research firm thinks the business will pass the $20 billion mark this year — gains that could come at Google’s expense.
