Google parent company Alphabet beat the Street’s expectations with its Q4 2021 earnings release. The big headline: Lest anyone forget where Alphabet’s bread is buttered, take note that search continues to account for the vast majority of the company’s massive advertising revenue. It always has been — and still is — Alphabet’s cash cow. It’s not surprising, then, that “commerce” was a big focus during its Q4 2021 earnings call earlier this week. Its brand story, however, continues to feel like an afterthought; adtech got no airplay; and competition from ad giants such as Amazon is material.
- Search continues to dominate, driving outsized impact. In this latest earnings release, search saw year-over-year growth of 36%. This had an outsize impact on ad performance, as search accounts for 71% of Google ad revenue (and more than half of overall revenue). This was primarily driven by retail, which felt in line with Alphabet’s thematic story around “commerce” throughout the call. But it is not clear whether such continued growth is sustainable — leadership did not provide clear guidance on whether they anticipated ongoing performance like this or provide much in the way of specifics on how they thought they could.
- AI got a lot of air time, and its applications in advertising are myriad. Making search better by applying AI (among other things) was a drumbeat throughout — this came as no surprise, as it’s a core pillar of Alphabet’s continued success. The company has also set its sights on continuing to simplify, streamline, and expand its ad offerings, leveraging multiple forms of AI. The launch of Performance Max is a salient example: P-Max is a “goals-based campaign type” designed to attract more dollars from performance advertisers by expanding search-based programs across the broad Alphabet ecosystem, including Display, Maps, and more.
- YouTube is fast becoming a commerce platform, though brand dollars still seem elusive. YouTube ad revenue grew 25% year over year, and the team placed a strong emphasis on integrating “shoppable” elements into the YT environment, such as shoppable, holiday livestream events. (This is in keeping with a 2022 prediction Forrester made around growth in shoppable TV.) One exec specifically referenced YouTube as a place where “our commerce opportunity remains really exciting.” That said, the company’s story around connected TV was unremarkable at best, and it made just a passing remark touching on attempts to capture TV brand dollars.
- Alphabet liberally invoked the word “privacy” but remained vague on details. Aside from a brief note on the introduction of its new “Topics” initiative (the more transparent and simplistic Federated Learning of Cohorts replacement), Privacy Sandbox didn’t get much attention in the presentation itself. And Alphabet’s advertising technology assets — which include buy-side and sell-side tech — received no airtime. The privacy and anticompetitive headwinds are as strong as they have ever been. It’s clear the company is proceeding with extreme caution here and continues to keep many specifics (the recent Topics announcement aside) close to the chest.
- Traffic acquisition cost continues to grow. At 28% growth year over year, the costs Alphabet expends to continue attracting traffic are meaningful. The company faces an ongoing challenge on this front as consumers continue to diversify how, when, and where they access information. This will only continue to make attracting traffic an uphill climb. Amazon, anyone?
What does all this mean for B2C marketers? It’s a bit of a “same as it ever was” when it comes to engaging with Google: Modern marketers can’t avoid it as a source for capturing consumer demand, and Google certainly makes it palatable to go all in on its adtech stack to do it. But when considering how to build out your own fully fledged advertising technology stack, remember that Google’s not the only game in town. Check out our most recent roundup of the ad platforms space for more on this and my just-released research on The Future Of DSPs to get specific guidance on selecting buy-side programmatic partners in the era of data deprecation.