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Google Parent Alphabet Benefits From Mobile Search, YouTube

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

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What’s in a name? Company reorganisation does not prevent Google from posting healthy profit and revenue increases

The parent company of Google, Alphabet, has posted very healthy third quarter financials as the new corporate entity shows no sign of slowing growth.

Google flipped its corporate structure on its head back in August, when it stunned the world with the news that Google was now just the search engine part of Alphabet.

Corporate Shakeup

Google management make the decision because it opens up new opportunities for investors who want to concentrate on areas other than search engines, Google’s so called “moonshot” areas.

smart contact lens leadThese include Calico (fighting age-related diseases); Fiber (providing high-speed internet); Google (Search, Android, Maps, YouTube, Ads, Apps); Google Ventures (VC funding for promising startups); Google Capital (investments in technology trends); and Google X (drones, Google Glass, balloons, self-driving cars).

And it is clear from the latest financials that the corporate shakeup has done little to dent the ability of Google/Alphabet to make money.

For the third quarter ending September 30, the company posted net income of $3.98bn (£2.6bn), up from $2.7bn (£1.8bn) a year earlier.

Sales were equally healthy as revenue rose 13 percent to $18.7bn (£12.2bn) from $16.5bn (£10.8bn) in the same year-ago quarter. Analysts had expected revenue of $18.54bn (£12bn).

So what accounted for Google/Alphabet’s impressive performance? Well, the company pointed to “substantial growth of mobile search revenue, complemented by contributions from YouTube and Programmatic Advertising”.

This substantial growth in mobile search revenue is noteworthy, as investors had been concerned that Google’s domination of the desktop search advertising would not be replicated in the smartphone arena. There were also concerns that advertisers would not pay as much for adverts shown on the smaller screens.

“Our Q3 results show the strength of Google’s business, particularly in mobile search,” said Ruth Porat, CFO of Alphabet and Google. “With six products now having more than 1 billion users globally, we’re excited about the opportunities ahead of Google, and across Alphabet.”

The company also pleased investors with the news of a stock buyout program, after the board of directors gave the go-ahead for Alphabet to spend $5.1bn (£3.3bn) buying back its own shares.

Youtube also continues to be a lucrative avenue for the search engine giant. And it could be about to make the company a lot more money.

Earlier this week, Google revealed it will be launching a premium version of its Youtube website that will allow users to watch videos without being interrupted by adverts.

YouTube Red will initially be available in the United States from 28 October, costing $9.99 (£6.51) a month, however users who sign up through Apple’s app store will pay $13 (£8.47) a month.

Starting from January next year, Alphabet will begin reporting Google’s financial numbers separately from the other businesses.

Have you heard of Alphabet? It’s the new Google!