Google and YouTube failed to end the pandemic

Alphabet posted net revenue down 8% year-on-year as YouTube ads generated “only” 6.9 billion euros in the first quarter. For its part, Microsoft’s net profit reached 16.7 billion (+8%) for the third quarter of its staggered fiscal year.

Alphabet, Google’s main company, published net income on Tuesday, which was down and below market expectations, at 16.44 billion dollars for the first quarter, 8% less than a year ago, when the online advertising giant had a unique quarter thanks to the pandemic. At 68 billion dollars, its turnover jumped 23% in a year, but was also slightly lower than analysts ’forecasts.

YouTube, in particular, seems to have made little progress in a year. Ads on the video platform generated “only” $ 6.9 billion in the first quarter, no more than $ 6 billion last year. In the mobile video consumption market, the ultra-popular TikTok platform “is a huge threat now, and everyone indicates that they will continue to gain users and generate more revenue”, commented Paul Verna, analyst in eMarketer.

“This factor, combined with current economic pressures, is not good for online advertising in general and for YouTube in particular,” he added. In particular, he cited inflation and difficulties in the global supply chain, forcing advertisers to “carefully manage budgets”. YouTube took a stand in TikTok territory in March 2021 by launching YouTube Shorts, a very short format (less than 60 seconds).

These videos now generate “more than 30 billion daily views, four times more than a year ago”, Sundar Pichai, the head of Alphabet, welcomed at the time a conference call with analysts. He said his engineers are, “as always, focusing first on creating a great user experience before working on monetization.”

“Hangover”

The boss also assured that, despite the resumption of activities suspended during the pandemic, “time spent on YouTube continues to rise”. However, a possible “post-pandemic hangover” should not be included, Paul Verna said. The big tech companies “admit not celebrating, but the health crisis has boosted their business tremendously”, he explains. “That kind of growth can’t last. If you consider that aspect, the results aren’t detrimental at all, Google remains at the forefront of search and very strong in video.”

Ruth Porat, the group’s chief finance officer, acknowledged that Google’s growth rate in 2021 has benefited from comparison to 2020. Returning to a more normal context works against it. He said the comparison would be “more difficult” for the current quarter, a period also affected by the closure of its commercial activities in Russia, associated with the war in Ukraine.

The Californian group’s stock lost about 5% during electronic trading after the New York Stock Exchange closed. But the company should “capitalize this year on retail recovery and supply chain improvement, two market drivers of online search, of which Google has a 59% share worldwide”, an estimated Paul Verna.

Clouds on the rise

Alphabet has also recruited with a vengeance: it now has nearly 164,000 employees worldwide, compared to 140,000 last year. “We will continue to carefully invest (…) in research and development and talent to support the creation of lasting value for all our shareholders”, Ruth Porat stated, quoted in the press release.

In early March, the company announced its intention to buy cybersecurity firm Mandiant for approximately $ 5.4 billion, to strengthen its cloud (remote computing) offering. Google Cloud saw its revenue jump 44% to $ 5.8 billion. It is the third largest cloud service provider in the world. Its market share will rise to 9% by the end of 2021, against 7% by the end of 2020, according to research firm Canalys. AWS (Amazon), the industry leader, accounts for 33% of global cloud spending, ahead of Azure (Microsoft) with 22%.

Microsoft, which saw its revenues and profits rise as the market expected at the beginning of the year, largely thanks to the ever -increasing demand for cloud (remote computing) and despite inflation and supply problems. chain. The American group on Tuesday posted a turnover of 49.4 billion dollars for the third quarter of its staggered financial year, up 18% over a year. Its net profit reached 16.7 billion (+8%).

Although many activities continued in person, routines established during the pandemic, such as working from home or shopping online, seemed to be adopted over the long term, benefiting the technology giants. Azure’s revenues jumped 46% in one year, as in the previous quarter. On Wall Street, Microsoft took nearly 5% during electronic trading after trading closed.

Linkin revenue up 34%

CFRA Research analyst John Freeman also noted 11% growth in sales of the Surface (personal computing) product line: “It’s impressive and it’s positive for the technology supply chain, even if it’s not we’re still out of the woods, ”he said. From computers to cars, many industries are experiencing shortages of electronic components and supply chain difficulties associated with high demand and factory closures caused by the health crisis, particularly in China.

“The most surprising thing is LinkedIn’s 34% revenue growth,” John Freeman also noted: the professional social network “continues to be a small‘ success story ’for Microsoft.This acquisition looks better quarter after trimester ”. Its video game activity, the Xbox, on the other hand, saw its turnover increase by only 4%, a poor result compared to other branches of the Redmond group (north-west of the United States).

In late January, Microsoft announced its plan to acquire Activision Blizzard studios (Call of Duty, Candy Crush) for $ 69 billion, possibly the largest merger-acquisition operation to have taken place in the technology. The company has sights set in the metaverse, these parallel universes where people, augmented and virtual reality must combine, through screens, augmented reality (AR) glasses and virtual reality (VR) headset.

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