The following is the 1q21 financial report interpretation: the increase of influence of YouTube is better than that of TV e-commerce with outstanding performance From Google recommended by recordtrend.com. And this article belongs to the classification: cloud computing, Search Engines, Mobile Internet, Network entertainment.
On April 28, 2021, alphabet (the parent company of Google) today released its financial results for the first quarter of the 2021 fiscal year ending March 31. According to the report, Alpha’s total revenue in the first quarter was US $55.314 billion, an increase of 34% over US $41.159 billion in the same period last year, and a year-on-year increase of 32% excluding the impact of exchange rate changes; According to U.S. GAAP, alphabet’s net profit in the first quarter was $17.93 billion, up 162% from $6.836 billion in the same period last year.
After the results were announced, Google CEO Sundar Pichai, CFO Ruth Porat and CBO Philipp Schindler held a conference call with analysts to answer questions about their businesses.
The following is a summary of analysts’ responses to the conference call:
Sandar Pichia: I think we are still in a very early stage of searching this area. As a recent example, a cargo ship ran aground and blocked the Suez Canal, which was then dredged. If you google this question shortly after the incident, we can give the right answer. This seems to be a matter of course, except that we need to provide the right answer, and will not give wrong answers or false information about many other things. To do that, we need to invest first, which is our long-term view. Last year’s Bert, I think, is a good example. This is one of our biggest quality improvements. Based on the breakthrough made by the Google AI team in the transformers natural language processing model, this breakthrough has laid the foundation for quality improvement. Therefore, we will continue to invest in deep technology, and the network is expanding this information in an unprecedented way, so this is an important part of our work. In addition, there are many opportunities to improve the user experience, such as our efforts in the field of shopping. Shopping is also one of the areas where we strive to improve the user experience, and we have invested a lot in it.
Philip Schindler: About youtube, I want to start with direct advertising. The growth in the first quarter was excellent. A few years ago, direct ads didn’t exist on YouTube. Today, this is a large-scale and fast-growing business, but in my opinion, this business is just starting. People have started watching videos on youtube and then deciding what they are going to buy. We hope to further simplify the purchase process and make the “discovery” process easier. In addition, for creators, we have launched a new purchasing function. So users can buy things directly from their favorite creators on YouTube. Let’s take an example from our brand linkage project. After Calvin Klein tested these new functions, I think the brand search increased by about 200% and sold many products. For businesses, they can now put products and services directly into video advertising. I think what we are trying to do is still on the surface, and it is very likely that it will have great commercial value on YouTube in the future. Secondly, YouTube will have the opportunity to become an important platform for touch users such as brands. Because the efficiency of traditional cable TV is getting lower and lower. Today’s advertisers are using YouTube to reach their audience. You know, more and more people between the ages of 18 and 49 are watching youtube and all kinds of cable TV. And brands have found that YouTube’s incremental influence is better than TV’s. We also see that advertisers promote influence and results through brand awareness and action transformation. Therefore, in this respect, we think there are many opportunities.
Doug anmuth, JPMorgan analyst: I have two questions. First of all, on the cloud business side, the change of service life has brought significant benefits. But in the past, I seem to remember you once said that the first quarter was the biggest loss of the whole year. Is this still the case now and in the future? Second, in view of the changes in the management of waymo, will there be some adjustments in the development and operation of waymo in the future?
Ruth Polat: regarding cloud business and overall performance, I will not speculate on the month on month change, because we are still in the very early stage of cloud business development. Given the opportunities we see, we still intend to continue to make valuable investments in the cloud. As you said, there were two factors that had a positive impact on the profit margin in the first quarter, including depreciation expense items and the exceptionally high impairment mitigation of loan losses recorded in the first quarter. Therefore, the main point is that we will continue to invest heavily in products and go deep into the market. With the increase of scale, both operating loss and operating profit will be improved. At present, our focus is still on long-term performance, and continue to invest in the development of cloud business.
Sandar Pichia: about waymo, John Krafcik resigned as CEO, which he has planned for a long time. Dmitri dolgov and tekedra mawakana have been cooperating with John’s arrangement. Our investment in waymo will continue and we are excited about the launch of the waymo one fully automated driving experience in Phoenix. We are also accelerating the development of the next generation of Waymo autopilot, which is scheduled to be deployed in San Francisco. In the last quarter, waymo has started to carry out limited testing in San Francisco. We will focus on ensuring that we can make real technical progress and put it into operation, and we will continue to work in this direction.
Brent thill, an analyst at Jeffery: the industry has really had a hard time. I wonder if the management could give a general description of the recovery. For example, the recovery of the tourism industry, and whether there are other vertical fields that have not yet recovered but are expected to get out of the predicament in the second half of this year?
Ruth pollat: Overall, the strong results partly indicate that some of the shocks at the end of the first quarter of last year have been eased. Data in many areas have rebounded. An important thing we want you to know is that we do see the trend of digital transformation accelerating, but it is still difficult for us to predict the extent of long-term changes in consumer behavior and advertising spending. There are some obvious examples, such as the consumption of household goods and equipment for home work, which obviously will not be repeated. So our main point is that it’s too early to assess how long the trend of consumer behavior will last.
Brent Hill: what about tourism? Can you tell us the trend you see in the tourism industry?
Ruth Polat: Philip has described some areas where we intend to continue to innovate to better help our partners. We have nothing else to add.
Justin post, analyst at Merrill Lynch and Bank of America: I have two questions, Philip and Ruth. First of all, Philip, you mentioned the durability of several improvements before, but this is difficult to assess. So you can help us better understand what you think are the key drivers of the search business in the next few years? For example, product improvement and some changes in vertical areas such as shopping? What do you think of the impact of these key drivers on search growth? The second question is Ruth. The model shows that it has a good efficiency in terms of cost and profit last year. So did the epidemic period bring you some lessons that can help us continue to improve the cost-effectiveness after the epidemic?
Philip Schindler: I usually see the different elements of search as the key drivers. There is no doubt that the first one is the query. When users need information, is our platform the first thing they think of? The second one I want to call coverage. How many queries are commercial and how many queries are advertised? The third is the click through rate, or personal click through rate, how to continue to optimize? From providing better and more creative advertising and query results to deploying the next generation of machine learning, what improvements can we make? Finally, of course, CPC (click cost). What is the click cost people are willing to pay for advertising? Of course, the click cost largely depends on the quality of traffic and the more important conversion rate. We are working closely with our global partners, to be precise, our advertisers, to help them optimize conversion and ROI. These are the four elements of our search.
Ruth Polat: on the issue of cost-effectiveness, I don’t think it has changed in essence. Our attitude towards the allocation of investment capital is to support the long-term growth of our business which is financially sustainable. That’s to say, stay sharp in the product area and make sure we have sustained investment. Then I have been emphasizing operational excellence. For example, our technology infrastructure system can improve productivity and speed up the product team. Then there’s a very important effort around privacy, security, and content censorship. To get back to your question, last year’s experience really emphasized the value of investment in protecting and deepening operational excellence. It’s very useful for us to have the ability to serve consumers during this period of time. So, the framework has not changed. You can see from our first quarter data that there are some items that deserve special attention, such as the mitigation of loan impairment and the benefits of depreciation life. Then there are some things related to the epidemic, such as the alleviation of the impact on tourism, entertainment and marketing. Then, another key point is that we will continue to invest in long-term growth in Google services and Google cloud. We will also continue to maintain the existing investment framework, pursue high efficiency, and ensure that we can provide the best services for users and customers.
Robert W. Baird analyst Colin Sebastian: Good afternoon, management. I would like to ask sander, you have been emphasizing that machine learning is the advantage and differentiation of the overall platform over the years, including cloud services. We also see that competitors are also very concerned about the ability of machine learning. I was thinking, can you tell us about the pace of change in data science and how Google will maintain a competitive advantage in these areas? Another question I would like to ask Philip is about the power Google shopping brings to the search business. Can we think that the transition to free product list will bring the expected growth of retail advertising on the platform? Or are there other factors behind this besides the epidemic?
Sandar Pichia: we have been emphasizing artificial intelligence, which all comes from the basic research and development we do. I think we should be one of the largest ai r & D investors in the world. Looking forward to the future, we will continue to do it in many different ways in various basic fields. We have also made breakthroughs, such as the transformers I mentioned earlier, and how these breakthroughs can be translated into Bert, and thus improve our search quality. Similarly, we are always committed to improving AI and integrating the results into our Google cloud platform products to better serve our enterprise customers. This is also a path we have been adhering to. We also focus on all levels of the stack, so you can see that we are working very hard on TPU, and we are also considering providing a tool chain for developers. Therefore, looking forward to the future, I think there will be more efforts to blossom and bear fruit, which I am full of expectations. Therefore, I believe that Google cloud platform will gradually stand out with the accumulation of our competitive advantages.
Philip Schindler: About Google shopping, bill ready has been on our team for a year. We also adjust the focus of our shopping strategy to better serve our retailers and consumers, and try to build an open retail ecosystem. We are satisfied with the progress made so far, such as the free product list and zero commission you mentioned, which have effectively lowered the threshold of online retail. Shopping advertising is still an effective way for retailers to promote their products. A combination of free and paid services also has value. We have also established new partnerships with Shopify, PayPal, etc. to give retailers more flexible choices. Of course, we will continue to simplify – I would like to call it “end-to-end user and business experience”, especially as we are trying to simplify the back-end experience for businesses, especially for hybrid retailers (that is, retailers with mixed online and offline models). In general, we hope to make it easier for retailers to open stores on Google.
Mark Mahaney, analyst at evercore ISI: I want to know your strategy to keep advertisers. Under the influence of the epidemic, enterprises all over the United States and even the world have been affected to a certain extent, but at the same time, it is a huge advantage for our business, because in the second half of last year, a large number of cable TV advertising budget flowed to online channels such as YouTube. So, can you share the new advertisers on Google platform? What efforts have you made? How confident are you in leaving these new advertisers, or what is your strategy for retaining them?
Philip Schindler: there is no doubt that many of the new advertisers you mentioned belong to small and medium-sized business advertisers, and last year was especially difficult for small and medium-sized business owners. The epidemic disrupted their way of communicating with consumers. But in other words, the epidemic is also a catalyst for key consumption trends, creating many new opportunities for SMEs. In addition, it is obvious that consumers tend to spend more time shopping online. They buy more products online, are willing to try new brands, and are eager to support local enterprises and local small and medium-sized enterprises. Therefore, since last year, the search volume supporting local enterprises has increased significantly. We have also been focusing on supporting small and medium-sized enterprises, such as launching simpler tools to help them embrace the digital platform more quickly. Over the years, we have also made a lot of investment in this field. We have a large number of various solutions to help them transform to online and gain exposure in our key products (search, maps, youtube, etc.). We have also received all kinds of positive feedback from these small and medium-sized enterprises.
Michael Nathanson, analyst at Moffett Nathanson: I have two questions for Philip and Ruth. First, Philip, in which category and geographical area do you think our share in the marketing budget is still relatively low, and there is a big room for improvement in the future? The second question, Ruth, we have been asking about the capital expenditure for improving service life. But I wonder if the epidemic has changed your strategy of purchasing office space? How will we deploy the funds for the future office space? Based on the situation after the epidemic, how should we look at the capital expenditure in the next few years?
Ruth Polat: let me first answer the question of capital expenditure. I want to answer it in two parts. First of all, in terms of office facilities, I think it is necessary to point out that we will continue to invest in technology infrastructure. In this quarter, we will also continue to invest to support the growth we see in cloud business, search business, advertising and machine learning. None of these will change. But in fact, your capital expenditure focuses on office facilities. We have always been very clear about this. We attach great importance to the value of people working together in the office environment. We are also trying a mixed office mode, that is, the combination of home work and office work.
When we look forward to office related real estate development, our first consideration is that we will increase the number of employees and we want to reduce the density of employees in the workplace. Therefore, even in the mixed office mode, we still need to expand the office space. Therefore, we will continue to expand the office park and office facilities. In the first quarter, you can see that the speed of our expansion has decreased and the speed of decoration has decreased. However, as we plan to rearrange the office space for this new office environment, we expect the progress of decoration will be accelerated. Therefore, we will continue to invest in the construction of office parks around the world as usual.
Philip Schindler: we always look at our business from a global perspective, and we look forward to it. But remember, we don’t just get ATL (“online”) marketing budget from the perspective of solvable market, such as traditional advertising, TV advertising, etc. BTL (“offline”) marketing budget is very important, including promotion price, product display location, sponsorship and so on. Due to the epidemic situation, the development of e-commerce has accelerated significantly. However, more than 80% of business activities still take place offline. So, in this regard, we still have broad opportunities in the world to take advantage of these other budgets. So, the growth space here is huge. Then I mentioned this opportunity from the perspective of query and business intention. We are trying to use machine learning. But the ultimate goal should and can only be that we want to help our partners achieve success and increase their ROI. As long as we continue to maintain this path, I believe the marketing budget will continue to develop in the direction we want.
Wells Fargo analyst Brian Fitzgerald: good management, you mentioned the advantages of supply side products in the network business. I want to know, how would you evaluate the performance of demand side products? Another problem is that some of the adjustments you’ve made in the past few years may have the effect of attracting advertisers to your technology stack. So, does this also promote the strong growth of Google cloud platform, especially data analysis products such as bigquery?
Ruth Polat: in terms of network revenue as a whole, I think I have simply mentioned at the beginning that what we really value is the continuous growth of advertisers’ expenditure, especially the growth advantages of AdMob and Ad Manager, as well as the advantages of application promotion. All of these are reflected in the comprehensive strength of our partners’ assets in the first quarter.
Google parent company: 4q20 teleconference record with the recovery of user activities, advertising investment is also slowly recovering lphabet:1Q20 Revenue in the first quarter was 41.159 billion US dollars, up 13% year on year : 2q20 net profit of $6.959 billion, down 30% year on year : 4q20 financial report teleconference record has confirmed the CEO and brand of electric vehicle company Baidu: 4q20 revenue 30.3 billion yuan, annual revenue 107.1 billion yuan in 2020 Baidu: 1q20 revenue 22.5 billion yuan, exceeding market expectations 14% growth
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