Google Parent Alphabet Says YouTube Q2 Ad Sales Up 5.8% To $3.8 Billion; Search Sales Slip To $21.3 Billion

Jill Goldsmith
·4 min read

UPDATED with comments from CEO/CFO conference call:

As YouTube advertising firmed nearly 6% to $3.8 billion in the second quarter, Wall Street also tried to get sense of YouTube TV, which isn’t broken out in the earnings reports of Google parent Alphabet.

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When one analyst asked CEO Sundar Pichai if YouTube TV would ever be a money-making proposition for the company or just remain an interesting brand extension, he seemed to say he wasn’t totally sure.

“As YouTube TV gets more scale, I think we will see more opportunities there. We are obviously still in the early stages of building out the product and recently added a bunch of new channels and are making sure it’s working well. In the U.S.,” said Pichai. “The traction the product is getting will become more obvious over time but it’s still too early,” he added.

The live television platform launched in 2017. The service last month announced a hefty $15 price hike to $64.99 as pricing pressure continues to squeeze the so-called “skinny bundles.” Early in 2020, Google said YouTube TV had passed 2 million subscribers it didn’t unveil any update to the number today.

CFO Ruth Porat said YouTube Premium — an ad free version of regular YouTube with music options — is growing fast and has more than 20 million paid subscribers.

She said the company is investing heavily in content for YouTube TV and regular YouTube. Where costs will fall, she said, is on spending on “office buildings” — even as it continues to add staff. She said the company bulked up its workforce by well over 4,000 people last quarter, but at the same time is reimagining work, as many comapanies are. Google made waves when it announced earlier this week that employees would be working at home at least through July of 2021.

Previously:

Google parent Alphabet said YouTube advertising firmed to $3.8 billion in the second quarter from $3.6 billion the year before, as sales from search slippped nearly 10% to $21.3 billion and the giant beat estimates on the top and bottom lines.

Total sales, including cloud, eased 2% to $38.3 billion. Net income came in at $6.59 billion, or $10.13 a share.

Analysts had expected Alphabet to report earnings of $7.94 a share on sales of $37.33 billion — compared with $14.21 a share and sales of $38.94 billion a year earlier.

Alphabet doesn’t break out numbers for YouTube TV, the live television platform launched in 2017. The service last month announced a hefty $15 price hike to $64.99 as pricing pressure continues to squeeze the so-called “skinny bundles.” Early in 2020, Google said YouTube TV had passed 2 million subscribers.

The numbers — out after the closing bell Thursday alongside other big tech companies like Facebook — will give investors the most thorough peek to date at the health of digital advertising. The COVID-19 pandemic shuttered broad sectors of the economy and kept consumers at home, resulting in a major advertising disruption even as engagement across many platforms surged.

The pain was evident in the first three months of the year from the lockdown starting in March. That continued and Wall Street was right in predicting a rare decline in revenue for the Sundar Pichai-led company. In a call later this afternoon investors will look for current ad trends as COVID-19 cases surge in states across the country.

“In the second quarter our total revenues were $38.3B, driven by gradual improvement in our ads business and strong growth in Google Cloud and Other Revenues,” said Alphabet and Goolgle CFO Ruth Porat. “We continue to navigate through a difficult global economic environment.”

Pichai is coming straight off of testimony before a Congressional antitrust subcommittee on Wednesday along with the CEOs of Facebook, Amazon and Apple as part of a yearlong probe into anti-competitive practices. Lawmakers were combative and it’s not clear where it will lead. The company also faces inquiries in Europe and Australia.

Alphabet will be hosting an analyst call at 4:30 pm ET.

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