The March quarterly results from Google’s owner Alphabet underline why those Australian and other legacy media companies and the Australian government are kidding themselves in claiming a big win over Google and Facebook earlier this year.
The media companies claimed (with help from the government and Treasurer Josh Frydenberg and Communications Minister, Paul Fletcher) that they had wrung a considerable but unknown amount of money from Google and Facebook.
Certainly investors thought that as well and up went the share prices of News, Nine and Seven West Media, making shareholders content and sidelining the issue.
But the reality is that it was a weak takedown of Google (and Facebook for that matter). For a small amount of money (relative to the billions of ad revenues flowing their accounts every day) Google and Facebook are the real winners as they go one raking in billions of dollars a weak in ad revenues and still destabilising other businesses (including the legacy media).
Just take a look at the March quarter figures from Alphabet released overnight Tuesday, Sydney time. This company made gazillions of dollars in extra revenue and profits – from every part of the business.
Total sales for the giant including Google Cloud reached $US55.3 billion for the quarter, up 34% from $US41.7 billion in the first quarter of 2020. Ad revenues jumped 32% to $US44.7 billion from $US33.7 billion.
Ad revenues on YouTube were up 48% to $US6.01 billion in the quarter as well from $US5.70 billion (How much of that will be shared with the likes of Nine, Fairfax, Seven and News Corp).
That saw Alphabet’s net profit more than doubled to $US17.93 billion in the first quarter from $US6.8 billion a year earlier.
In other words the attacks on Google by the Morrison Government, News Corp, Nine and others had no impact whatsoever on the finances of Google and its profitability.
The company ended the March quarter with more than $US135 billion against $US136 billion at the end of December.
It’s incredible to think that Morrison, News (and especially CEO, Robert Thomson) have cheered and boasted about bringing Google (and Facebook) to heel.
Google (and no doubt Facebook) made a calculated business decision to pay up (‘walking away money’ in Wall Street parlance) so they could get back to making an awful lot of money unhindered.
Facebook’s results told a similar story later this week.
The deals done in Australia and elsewhere represent payment of a nuisance tax to the legacy media companies by Google and Facebook.
Meanwhile Amazon and Apple continue to snuffle up billions of advertising dollars (as does Microsoft) on the quiet.
The government and the media companies didn’t talk about their activities but between them they are raking in the best part of $US40 to $50 billion annually now from various types of advertising, much of it linked firmly to their own services and products and seen only inside their walled gardens.
