Alphabet will continue to make money from advertising
In the past quarter, the Internet company Alphabet Inc. (GOOGL) failed to meet the expectations of Wall Street analysts regarding revenue. However, investors generally are optimistic about the company’s long-term prospects, especially given the growing advertising market. It should note that advertising in one form or another provides Alphabet with about 80% of its revenue; therefore, any changes in this market will affect the company’s income. Alphabet’s revenue in the second quarter was $69.69 billion, while Wall Street expected $69.9 billion.
The company failed to meet expectations in all segments, including YouTube and Google Cloud. Nevertheless, advertising revenue increased by almost 12% year-on-year to $56.3 billion. And the growth trend of this segment is likely to continue, as spending on digital advertising worldwide may increase from $521 billion in 2021 to $876 billion in 2026, that is, by 68%. Due to its scale and prevalence, Alphabet can become one of the primary beneficiaries of this growth. In addition to advertising, the YouTube video service can become an important driving force for Alphabet.
The company is taking significant steps to expand this platform. In the fall, Alphabet launches the streaming market through the YouTube app, where users can view different services and subscribe directly through the platform. The company is currently talking with several streaming companies about joining the channel store. Earlier, Alphabet also added the Shorts feature — the ability to place short videos that can compete with TikTok. This feature has already attracted 1.5 billion users and, for sure, will be attractive to advertisers interested in attracting the attention of a young audience. Due to economic uncertainty, Alphabet shares will likely remain volatile in the short term. The company’s securities are trading 27% below the 52-week high, which may be a perfect moment to enter. At the auction on August 30, GOOGL stock was worth $109.42.
