Google profits rocket by 68% to $18.9 billion after online ad sales soared: Tech giant faces growing antitrust claims after it was found to control almost 30% of entire world’s digital ad market
Google's parent company Alphabet recorded the highest growth in a decade as it announced annual profits of $18.9billion - a 68 per cent jump in the third quarter of the year.
Alphabet's highest ever revenue of $65.1billion in the recently-ended third quarter eclipsed the same period last year by some 41 percent, with ads on its Google search engine and YouTube video sharing platform credit with helping drive the bonanza earnings.
Both figures exceeded analysts' expectations for Q3, which had predicted profits of $16.2 billion and sales - revenue - of $63.5 billion.
The company, which announced an operating income of $21billion, is on pace to have 28.6 percent of the global digital advertising market in 2021, according to eMarketer, just ahead of Facebook's 23.7 percent share, as online purchasing soared during lockdown.
Google generates hundreds of billions of dollars of revenue a year by selling ads that appear along with its search results, in addition to ads that appear on sites across the internet.
A bombshell unredacted lawsuit, unsealed Friday in the U.S. District Court of the Southern District of New York, revealed that Google takes between 22 percent and 42 percent of all online ad spending that they facilitate on behalf of advertisers and publishers.
The suit alleges that Google has taken actions to 'lock in' advertisers and publishers, leaving companies little choice but to use Google's own ad serves, as the tech giant controls the dominant tool for placing ads online and runs the primary platform that links consumers and sellers. That has sparked antitrust
Google's parent company Alphabet has recorded the highest growth in a decade as it announced profits of $18.9billion. Google's California headquarters is pictured above
Alphabet's highest ever revenue of $65.1 billion in the recently-ended quarter eclipsed the same period last year by some 41 percent, while profits increased by 69 percent (pictured: Google's revenue in Q3 for each of the past 12 years)
Sundar Pichai, CEO of Alphabet and Google, said that Google's outstanding profits in Q3 2021 are down to the company's 'artificial intelligence' investments (pictured: Pichai in May 2019)
Google's revenue results topped analysts’ estimates of $16.2billion in profit and sales of $63.5 billion.
'This quarter's results show how our (artificial intelligence) investments are enabling us to build more helpful products for people and our partners,' said Sundar Pichai, CEO of Alphabet and Google.
'As the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate,' he added.
Google remains a centerpiece of online activity, with offerings such as its search engine, ad marketplace, and YouTube video platform that give it extensive global influence.
Experts say its strong financial performance demonstrates the value of the company's search engine and YouTube video platform, which are two of the internet's prime locations.
It also shows how e-commerce advertisers have been particularly lucrative for Google, as have been advertisements on its YouTube video platform.
From July to September, YouTube sold $7.2billion of advertising space targeted according to content and users, against $5billion in the same period last year, according to Alphabet.
Its remote-computing business saw nearly $5billion in revenue, up 45 percent over the previous year.
Sundar Pichai (pictured), CEO of Alphabet and Google, said the company has thrived amid the shift to working from home
The surge in Alphabet's earnings comes as the tech giant faces increased scrutiny from regulators regarding its power.
Google is among internet giants in the crosshairs of regulators and critics concerned about whether they unfairly dominate markets and fend off competition.
South Korea's antitrust watchdog fined Google nearly $180million in September for abusing its dominance in the mobile operating systems and app markets, it said, the latest in a series of regulatory moves against tech giants around the world.
The company also faces an antitrust lawsuit in New York as the Attorneys General of 16 states, led by Texas, and a string of companies accuse Google of utilizing its stranglehold over search engine marketing and the buying, selling and serving of online advertisements to increase profits for itself.
'[T]he analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange],' one senior Google employee said, according to the lawsuit.
As the primary gateway for users surfing the web, the suit alleges, Google has comprehensively - and purposely - limited the ability of other companies to reach consumers.
The court filing further alleges that the company has used its monopoly to benefit itself, while simultaneously harming consumers, advertisers, publishers and the free market.
'Google, moreover, cannot establish business justifications or procompetitive benefits sufficient to justify its exclusionary conduct in any relevant market,' the suit states.
The suit also adds that by paying billions of dollars per year to companies like Apple, as well as web browsers and mobile carriers, the company successfully captures and keeps a stranglehold on key distribution channels.
Additionally, the complaint reasons that the company's monopoly over the market stems from its overwhelming influence over internet searches: 90 percent of internet searches in the United States use Google.
In one search example included in the lawsuit, a query for 'plumbers in Denver' shows how a Google ad is prominently displayed upon search and the organic result is 'well below the fold'
'This presentation increases the importance of paid placements, particularly on mobile devices that have much smaller screens,' the suit states. Figure 2 in the filing shows subsequent search pages as a mobile user scrolls down, noting there are no organic results
This depicts the relationship of how specialized vertical providers advertise to attract consumers, which includes 'going directly to their sites and bypassing general search, through search engines other than Google and through new forms of discovery,' according to the suit
The investigation is the latest challenge for major tech companies, which are under fire from both federal and state antitrust enforcers, as well as from Congress, over concern about whether a handful of huge companies have too much power and are using it to illegally stifle competition and harm consumers.
Google takes a cut of between 22-42 percent on ad transactions on the website's marketplace when compared to competitors, the lawsuit stated.
The company also makes it so that it wins a massive 80 percent of auctions hosted on its own exchange, meanwhile having served 75 percent of all online ad impressions in the U.S. in the third quarter of 2018, according to the lawsuit.
The contents of the court filing also reveal the stark differences between what Google says publicly, and what the company acknowledges to be true and says behind closed doors.
'Google concedes that an electronic exchange such as its own should not normally be able to extract such high fees in the market,' the document reads.
It then notes that Google execs even acknowledged that 'an exchange shouldn't be an immensely profitable business' during the federal investigation, which has been going on for the past two years.
The lawsuit further reveals that 'when rival exchanges attempted to gain market share by lowering their prices in 2017, Google's exchange maintained or even increased prices' - and still managed to bolster its own position at the top of the market.'
The filing then adds: 'Competing exchanges have not been able to meaningfully increase their market shares,' as a result of Google's monopoly over online ad space - even with rivals 'cutting their take rates by half.'
Google's alleged monopoly has shed a light on troubling concerns for businesses and consumers, according to a bipartisan group of attorneys general representing almost every state who launched an antitrust investigation of the search giant Monday.
Google has disputed the charges and called the lawsuit flawed, saying it collects lower fees for ads than the industry average.
The company's latest profit figures build on the pandemic trend that has seen an acceleration in people using the internet for shopping, work, learning and entertainment. Facebook announced that its profit in the third quarter grew to $9.2billion - a 17 percent increase
The company's latest profit figures build on the pandemic trend that has seen an acceleration in people using the internet for shopping, work, learning and entertainment.
Google's results came the same day that Microsoft announced a quarterly earnings surge fueled by cloud computing demand, saying it made a profit of $20.5billion in the recently ended quarter. Revenue jumped 22 percent from the last quarter last year to $43.5billion.
The results also came a day after fellow tech giant Facebook also announced huge profits soaring 17% to $9billion despite its whistleblower scandal, although Twitter reported a large loss due to a shareholder lawsuit settlement.
And a day earlier, Facebook announced that its profit in the third quarter grew to $9.2 billion - a 17 percent increase - and its ranks of users increased to 2.91 billion.
The strong financial figures came as the leading social network battles a fresh crisis since former employee Frances Haugen leaked reams of internal studies showing executives knew of their sites' potential for harm.
Twitter however on Tuesday posted a $537million net loss in the quarter after settling a lawsuit alleging investors were misled about slowing user growth.
Despite revenue rising sharply with the help of robust ad sales, Twitter still posted an operating loss of $743million, fueled by the more than $800million settlement.
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