Sundar Pichai is lifting the veil on Alphabet's revenue breakdown, revealing historical YouTube ad revenue and Google Cloud figures for the first time.
In his first financial report since taking the helm Alphabet CEO in December after Google co-founders Larry Page and Sergey Brin announced that they were leaving their respective roles, Pichai has finally provided details on Alphabet's divisions. Until now, the parent company had only provided a breakdown of Google revenue, not of its other businesses, to the chagrin of analysts.
Now unaudited figures show that YouTube ad revenue surged 36% between 2018 to 2019, bringing in $15.15 billion in 2019, of which $4.72 billion was generated in the fourth quarter alone. The 2019 figure is up 86% from 2017's $8.15 billion—the earliest it goes back—showing that despite YouTube's many brand safety issues over recent years, advertisers continue to pour in.
It means YouTube's ad revenues made up 11% of Google's $134.8 billion overall advertising revenue in 2019, and 9% of Google's total $160.74 billion revenue in 2019.
During the company's earnings call, chief financial officer Ruth Porat said the company pays out “a majority” of YouTube's advertising revenue to its creators.
Porat also revealed that YouTube’s non-advertising revenue, which includes money generated from its subscription services YouTube Premium and YouTube Music, reached a $3 billion revenue run rate in the fourth quarter. Also in the investor call, Pichai revealed that the subscription services have garnered a combined base of over 20 million subscribers, while YouTube's US over-the-top TV service now has a total of 2 million customers.
In the financial report, YouTube's non-advertising revenue is included in Google's 'other revenues' section, which generated $17.01 billion in the full year 2019.
Google's overall advertising revenue increased by 16% in the full year 2019, from 2018's $116.46 billion. Google's search (and other) revenue was $98.12 billion for the full year 2019, up from $85.3 billion in 2018.
The fresh details were provided in the company's fourth quarter and fiscal year ended December 31, 2019 report.
Elsewhere, Alphabet also revealed Google Cloud figures for the first time. The cloud division brought in $8.92 billion in revenue in 2019, $2.6 billion of it from the fourth quarter. This represents a 53% increase from 2018's $5.84 billion, and a more than doubling from 2017's $4.06 billion.
Pichai had previously revealed during the company's Q2 2019 results that the cloud division had reached an $8 billion run rate.
Alphabet's unaudited full-year figures show an 18% revenue hike to $161.86 billion. Net income for the year increased 12% to $34.34 billion.
In the full year 2019, sales and marketing costs increased by 13% to $18.46 billion. The company paid $1.7 billion in European Commission fines, significantly down from the $5.1 billion it shelled out the previous year.
In the fourth quarter of 2019, the Asia-Pacific region had the strongest growth, with revenue up 24% to $7.48 billion year-on-year. However, growth has been slowing: from 26% in Q3 2019 and 29% in Q2 2019, which itself is a slow down from the 36% growth rate in Q2 2018.
All regions were impacted by slower growth rates: US revenue grew 16% to $21.74 billion, down from its 21% growth rate the previous quarter; Other Americas grew 21% to $2.67 billion, down from 25%; and EMEA revenue was up 15% to $14.1 billion, down from 16%.
The company's Q4 results came in lower than Wall Street expectations, leading to a 4% fall in stock price in after-hours trading. In the quarter, Alphabet brought in $46.08 billion in total revenue, while its operating income was $9.27 billion.