While it has suffered a more subdued impact than Facebook and Snap, YouTube has not been spared the impacts of iOS 14.5.
During Alphabet’s third quarter earnings call on Tuesday, CFO Ruth Porat said YouTube was “slightly affected” by changes to privacy settings on iOS 14.5, which requires users to explicitly agree to the tracking for advertising purposes. Porat did not release impact figures, but said YouTube’s direct response formats were mostly affected.
According to chief commercial officer Philip Schindler, Apple’s privacy feature is “one aspect of the broader ecosystem changes underway,” adding that Google is supporting a future advertising industry built on “privacy-preserving technology. “which supports an open web.
Snap and Facebook, which released third quarter results, said Apple’s privacy changes impacted their ability to monetize. For Snap, this resulted in a 25% drop in its aftermarket share price.
According to Google CEO Sundar Pichai, Google and YouTube haven’t particularly benefited from the shift in ad spending to its platforms in light of Apple’s changes. Google stock fell about 2% when its results were announced.
Gains in depth
Overall, Alphabet’s strong third quarter performance reflects the return of advertisers to the market after the depths of the pandemic. Revenue rose 41% to $ 65.1 billion before traffic acquisition costs, beating analysts’ expectations. Operating margins increased 32% during the quarter.
Revenue from Google services increased 41% to $ 59.9 billion. Search, Google’s largest service revenue line, rose 44% to $ 37.9 billion, ahead of traffic acquisition costs. YouTube ad sales, meanwhile, rose 43% to $ 7.2 billion in revenue in the third quarter.
Traffic acquisition costs, which refer to the fees Google pays affiliates, were $ 11.5 billion in the quarter, up from around $ 8 billion last year.
Google Cloud grew 45% year-over-year to $ 5 billion, with customers such as Wendy’s, CarreFour, Cardinal Health and GE Appliances adopting Google Cloud for various aspects of their business.
By region, Alphabet grew 39% year-on-year in the United States to $ 29.8 billion. In EMEA, revenue also grew 39% year-on-year to $ 19.3 billion. In the APAC region, revenues increased 38% year-on-year to $ 11.7 billion.
Schindler noted the “unequal recovery” across the world, as some countries are slower to bounce back from the pandemic. “Uncertainty is the new normal,” he said.
Alphabet expects “virtually no impact” from the pandemic in the fourth quarter, against a 1.5% tailwind in the third quarter, according to Porat. But because Q3 performance reflects “weaker performance over the comparison period last year,” investors can expect performance to “decrease” in Q4.
YouTube on the rise
YouTube is the focus as the platform continues to invest in creators, CTV, commerce, and performance features for direct response advertisers.
CTV is “YouTube’s fastest growing screen,” Schindler said, and the company is taking the opportunity to bridge the gap between performance and brand advertising. Video action campaigns, for example, a direct response video ad format, are now available on CTV so that “advertisers can drive conversions on the big screen.”
YouTube also doubles the number of creators, more than 2 million of whom earn money through its partner program. And YouTube has surpassed over 50 million music and premium subscribers.
YouTube Shorts, the platform’s TikTok competitor, saw the number of daily new creators nearly double in the third quarter, Pichai said. “Shorts are an early but important area for us from a growth and investment perspective,” he added.
Still, content moderation is the top priority on YouTube, which continues to battle brand safety concerns.
“Responsibility for content has been our most important focus over the past few years,” said Pichai, adding that investments in AI and the promotion of trusted sources have reduced the rate of viewing of violent content on the platform. form.
Come in, we’re going shopping
Shopping continues to be a priority as the e-commerce business remains robust.
In addition to media and entertainment, travel and finance brands, spending by retailers boosted Google’s revenue in the quarter. As the world opens up, people are returning to stores but continue to shop online, creating an omnichannel shopping environment that Google wants to facilitate.
“We don’t see this trend reversing,” Schindler said. “We believe this will continue as the world reopens and shoppers oscillate between online and in-store. [shopping]. ”
Google has introduced more ways for businesses to display their services on search and maps, made it possible to track supplies inventories to show what’s in store and what’s available for pickup, and has increased AR testing capabilities for consumers.
Google then plans to exploit YouTube commerce opportunities, from purchasable live feeds to the ability to purchase directly from creator videos. “We are still at the beginning of what is possible,” said Schindler.