YouTube shines but Google ads continue to slow

image source, Reuters

Google's parent company has published details of its YouTube and cloud business for the first time, as the firm's advertising business continues to slow.

YouTube's ad sales in the last three months of 2019 rose 31% year-on-year to $4.7bn (£3.62bn), Alphabet said.

Overall Alphabet revenue increased by 17% year-on-year to $46bn - the slowest rate in more than two years.

While YouTube is rapidly growing, Alphabet's cloud business lags rivals.

For years the business did not publish revenue figures for its various divisions, to the concern of investors and regulators.

When Sundar Pichai took over as Alphabet chief executive last year the policy changed, although it is still not releasing profit figures for individual units.

Alphabet said it earned $2.6bn in cloud revenue for the most recent quarter - compared to almost $10bn at Amazon. However it is fast-growing, rising more than 50% year-on-year.

Alphabet and others make money in cloud computing by charging companies to host their data remotely, rather than firms maintaining their own servers.

Alphabet shares fell more than 4% in after-hours trade.

Paid Youtube subscribers

Although growth missed analyst forecasts, Alphabet's business remains strong, said Nicholas Hyett, equity analyst at stockbroker Hargreaves Lansdown.

"It's always important to put these sorts of misses into perspective," he said. "The core businesses, like Search and YouTube, continue to generate prodigious quantities of cash."

Google's advertising revenue increased 17% to almost $27.2bn.

Alphabet reported quarterly profits of almost $10.7bn, up 19% year-on-year, while costs rose 18% to $36.8bn, as the firm invested in data centres and hired new staff.

YouTube now counts about two million paid subscribers, Mr Pichai said.

At more than $15bn for 2019, YouTube's ad business accounted for almost 10% of Alphabet's overall revenues last year - but the firm also said it shares a large portion of YouTube ad revenue with people posting videos.

Mr Pichai said the firm sees opportunity to make even more money off its YouTube adverts, including by targeting them more precisely.

"We see that as a big opportunity and are investing for it," he said.

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