Alphabet, parent company of Google, has proved once again that it’s better than pretty much everyone at this whole Internet thing. The company last week reported what The Atlantic called, “one of the most impressive earnings reports in tech history.”
The Wall Street Journal reports: “Alphabet on Thursday said profits spiked 33% in the third quarter as users clicked on more ads on smartphones, atop search results and before YouTube videos.”
The Atlantic has an explanation about how Alphabet produces its results:
Home to the largest advertising firm ever assembled, Alphabet is the second most valuable company on the planet, after Apple. But while the Cupertino smartphone-maker has sometimes struggled to maintain the ferocious growth rate of the early iPhone years, Alphabet’s growth is, somewhat ludicrously, accelerating. This quarter’s profit margin was its highest in almost five years, and the company has notched double-digit growth in sales in 15 consecutive quarters.
Several years ago, there were some concerns about Google’s profitability, as attention shifted to mobile devices, where ads are puny, annoying, and a more measly source of revenue on a cost-per-click basis. Today, cost-per-click is indeed declining. But Google has more than made up for the lost revenue by increasing total clicks on ads in mobile search results and YouTube videos, especially in Asia. While the Alphabet family includes some precocious younger children, like a growing cloud business and the self-driving car division Waymo, Alphabet is basically an advertising company, with nearly 90 percent of its revenue coming from ads.
There are at least two trends that are driving the company’s gains: its utter dominance as the discovery mechanism for information online and the inexorable shift to computers—particularly the ones in our pockets and purses—away from print and television.
The singular corporate innovation of the 21st century has been the creation of discovery platforms that, rather than own their own products, instead control their customers’ discovery of those products. Just as Facebook does not own its content, and Uber does not own its cars, Google does not own the websites it surfaces in the vast majority of search results.