3q20 financial report teleconference record will continue to make large-scale investment in Google cloud From Alphabet

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The following is the 3q20 financial report teleconference record will continue to make large-scale investment in Google cloud From Alphabet recommended by recordtrend.com. And this article belongs to the classification: cloud computing, Mobile Internet, Internet Entertainment, network service.

On October 30, 2020, Google’s parent company alphabet (NASDAQ: GOOG) released its third quarter financial statements as of September 30, 2020 on Friday. According to the financial report, the total revenue of alphabet in the third quarter was 46.173 billion US dollars, an increase of 14% compared with the same period last year of US $40.499 billion. Excluding the impact of exchange rate changes, the net profit attributable to alphabet was US $11.247 billion, compared with us $7.068 billion in the same period of last year, up 59% year-on-year. Diluted earnings per share were $16.40, more than analysts expected, compared with $110.12 a share in the same period last year. After the release of the financial report, alphabet’s share price soared 7.8% to $1690.

Alphabet and Sundar Pichai, Google’s chief executive officer, alphabet, Ruth Porat, and Jim Friedland, head of investor relations, attended the financial conference call to interpret the key points of the report and answer questions from analysts.

[Google’s parent company alphabet’s share price rose more than 3%, Q3’s performance exceeded expectations]

The following is the transcript of the financial report teleconference:

Analyst: sandar, you mentioned your innovation in search of the medium and long term. How will search evolve in the future? At present, the search is basically based on what the user enters. How will it move in the direction of “push”, such as Google Discovery’s push mechanism and advertising? How will you further make profits through your platform?

Compared with last year, you seem to adopt another strategy in terms of hardware this year, and you seem to be taking the middle and low-end line in terms of pricing. Is such a strategy consistent with your search goals in the long run?

Sundar Pichai: that’s a very good question. In terms of search, you’re right. Especially recently, it is very important to make information accessible through mobile applications and ambient computing. I regard it as a whole user journey. Obviously, search is going to evolve further, and Google discovery is good, especially on YouTube. On the one hand, it’s to make sure that people have access to relevant information, and on the other hand, it’s particularly important for us to make sure that we meet the information needs of our users. In addition, in terms of profit-making, opportunities are quite good. Whether it’s Google discovery or youtube, it’s important for us.

On your other question, hardware, I’m very excited about our further investment in hardware, some of which will not be effective until two or three years. I think we have clearly demonstrated our value proposition through pixel 4A and pixel 5, and we will build on that. In terms of product mix, we comprehensively consider which product specifications are the most important, and we will carry out further research and development on this basis.

At the same time, we will also consider it together with search and advertising, because these two aspects are also very important. The development of hardware will bring us two strategic benefits: one is to guide us to further develop the Android ecosystem; the other is to ensure that information is accessible to users. These two are also what we will consider when deploying the strategy. All in all, I’m quite excited about where we’re going in the future. Next year, you will see that we are moving more and more towards areas where we invest further.

Analyst: Rose, thank you very much for your interpretation of the third and fourth quarter costs. Can we talk about some significant changes in the cost structure, especially the sustainability of profit growth?

Ruth Porat: as I mentioned, we do have a strategic adjustment, we have a process of slowing down investment in specific areas, which started at the end of the first quarter. You have seen some results, including the impact of revenue growth.

In fact, we still focus on optimizing efficiency as much as possible, which we have emphasized in many previous financial reports. But, as sandar has mentioned again today, we are committed to making the right investments to support long-term profit growth. In addition, the exciting thing about the current environment is that it promotes the process of digital transformation, which further highlights the importance of our products and services.

We will continue to invest to take advantage of long-term opportunities. A good example is cloud, which we intend to continue to invest on a large scale, including supporting the continuous growth of the go to market and engineering sectors, because we see good opportunities in it.

Analyst: sandar, if I remember correctly, for two years, how is cloud going? What do you think is the biggest change so that the business is starting to take a bigger share? What will digital transformation look like in 2021? What are the most important strategic priorities?

Sundar Pichai: our strategy has always been very clear, focusing on five major regions, four customer areas, and six industries, namely, health care, retail, financial services, public affairs, media and entertainment, and manufacturing, and we’ve deepened our focus on these areas. This includes the go to market team and our partners, which are key to our success.

Some other key factors include the original industry solutions. We conduct in-depth study and propose corresponding solutions for the case. We price based on value. These are some of the developments that I’m very excited about. In terms of basic technology, we do have some differentiated competitiveness, such as data analysis and artificial intelligence. In these aspects, our advantages are quite significant.

In addition, I am quite satisfied with the implementation results of these investments. In fact, it will take time to employ and train the sales staff until they can bring results. And I can already see that investment in this area is gradually showing its results. I think it’s due to our great concentration in implementing this investment, and I’m quite optimistic about its future progress.

Analyst: I’d like to ask a special question about e-commerce. E-commerce looks more and more competitive. Have you seen a shift in consumer behavior on your platform as people search for content about online shopping? In your opinion, if you want to maintain the leading position in the e-commerce field, which are your key investment areas?

Sundar Pichai: I’m quite excited about what we’ve announced in the last few months and the progress we’ve made. We focus on the user experience, and we want to ensure that our consumers have the most comprehensive, high-quality product information and the best user experience. Our free shopping listing service. We started out in the United States only, and now it’s expanded to 48 countries. We also eliminate Commission on orders that are closed through Google checkout. We also connect paypal and Shopify to our platform to realize integrated services. This makes you realize that we focus on quality.

In the area of consumer behavior, search is an important asset for us. It conveys information to us about what consumers are interested in, and the feedback is real-time, whether users or advertisements. As you will see later, YouTube is a very important platform for e-commerce. Advertisers are in the middle of funnel marketing, even if it is not the best time, they still increase the scale of their investment to enhance demand and create topics. E-commerce is doing well on our platform, and we think it’s an opportunity, and we’re also focused on ensuring that the rest of the user experience is also pretty good.

Analyst: Rose, you mentioned that advertisers are back on YouTube. I just wonder if it’s possible to talk about the current situation compared with the previous level?

Ruth Porat: we’re very happy with the fact that advertisers are starting to budget again. I think this is due to the evidence that advertisers have reason to believe that consumers are showing demand in all areas, including home and gardening, computers for home work, and so on. YouTube users also have longer viewing times, giving advertisers better access to audiences they can’t reach through TV ads. So we’re also focused on helping them better deliver their message to people who come to YouTube looking for new topics or new, exclusive entertainment content that only YouTube has. This is also a great opportunity for us.

Analyst: sandar, thank you for sharing about the DoJ incident. Is it possible for legislators around the world to reach a compromise? What do you think are the differences between you in terms of this matter in different regions?

Ruth, in terms of the opportunity for youtube, if you have two billion users, you could have revenue of $10 per user? What do you think of profit making? Is it still in its early stage? Can you talk about the level of profit margin?

Ruth Porat: as for youtube, as I said, we’re quite happy with the current revenue progress. We also often mention that we pay most of our revenue to the creators of YouTube’s advertising content, and we also invest it in the construction of the infrastructure network, which is mainly used to store videos and operate youtube, including marketing and supporting content creators. We believe that creators are more valuable to the ecosystem than we think, not only to ensure that we create the perfect experience for users and creators, but also that we are building the ideal ecosystem.

We mentioned this when we talked about how we can invest in content tuning to protect the content that users watch. We believe that the mastery of content is also a very important part for us. We continue to support the development of this area, and we have made considerable progress in optimizing the user and content creator experience. As sandar said, in terms of paid member content, the cost of content acquisition is relatively higher, whether it is YouTube music premium or YouTube TV, which is calculated according to the proportion of revenue. In terms of membership, we are still in the early stage, we are still in the growing stage.

Sundar Pichai: in terms of legislators, regulation is not new to us. We will continue to participate in the discussion of this matter. It’s possible. According to the experience of previous cases, we firmly believe that we are bringing benefits to our users, and we will be relatively flexible to argue and adjust according to feedback and relevant policies. In fact, there are also opportunities in the process of dialogue with the legislative authorities. That’s what we’re going to do, and it’s going to be a long process. But in the end, what we can control is that we will do our best to focus on users and develop great products, which is the ultimate destination of our energy.

Analyst: it looks like you’re going to disclose more about Google cloud in the fourth quarter. Is it about profitability? Can we talk about whether cloud has reached a certain scale or whether there is no possibility of diluting profits?

In addition, there are two opportunities, one is Google maps, the other is Google discovery, which is bringing revenue growth. Is there any new data that can be used as strong evidence of profit opportunities?

Ruth Porat: when we’re publishing Google cloud data, we’re talking about quarterly data, but we’re also going to release annual data for 2018, 2019, 2020. We will not only release the revenue classification data collected earlier this year, but also include the operating income data of each sector, which we think is the most important data. Sandar and I have been emphasizing the huge opportunity of Google cloud, and we are investing heavily in it. In fact, compared with our peers, we are relatively late. We are greatly encouraged by the rapid growth in customer volume and revenue, whether it’s Google cloud platform (GCP) or Google workspace. We intend to maintain a large-scale investment in it to gain a leading position. I also mentioned go to market teams and engineering teams, as well as capital expenditures. We mentioned that this is a multi-year plan because we think we are still in the early stages of this journey.

Sundar Pichai: with regard to Google maps, Google discovery and so on, I think I mentioned earlier, and we should look at it from the overall perspective. A good example is that when developers promote their app, they can participate in our app promotion activities, and they can reach a large number of users. This model is very good. Recently, in order to serve small and medium-sized enterprises, we have expanded the scope of smart campaign to 150 countries. When small business owners go online for the first time, they can use their mobile phones to complete their first promotion in 15 minutes. We should think about this issue more comprehensively, which also gives me an opportunity to involve users in the way they like. Sometimes they will take the initiative to look for such opportunities, and sometimes they are very positive and willing to seize the opportunities we give them.

Analyst: with regard to your lawsuit with the Department of Justice (DOJ), Kent Walker compared your search engine partnership to the possibility that a cereal brand might pay a supermarket to occupy the row of shelves that consumers can see more easily. Philipp Schindler also mentioned that you may actually be able to reach twice as many markets as you think, including the payment services you provide in supermarkets. First of all, is it appropriate to put these two comments together? Can the two be considered together? In addition, can you talk about the macro impact on your advertising and e-commerce business, especially the competitive environment?

Sundar Pichai: in general, our mission is to provide information. The big environment we are facing is that people will search on the mobile end, and they have a lot of choices, so the key is to make Google an important tool to provide that information. You can imagine that when people want to buy a product, for example, they want to travel, they need to book hotels, which is the case in all industries. So for us, on the whole, what we need to do is to provide relevant information. This is the competition we face, and it is also an opportunity.

We are confident about the details of our lawsuit with the DoJ. We have done everything, including ensuring that we provide users with the best user experience, we also build the best Google for everyone, and let everyone find us on all platforms. We are committed to making it easier for users to access our services. We also work with other companies to achieve this goal. We want to be able to argue, but it’s too early. We are still in the stage of trying to understand the whole situation, and we may share more information with you later.

Analyst: I also want to talk more about online shopping, especially YouTube. Can you talk about the role of e-commerce and e-commerce advertising in its growth? As for Google workspace, it seems to be a unique opportunity. Considering the current home office environment, it is definitely a good opportunity to promote profits, including meet, cloud and other services. Can you talk about the level of user participation in English? And how will you make money from these services in the future?

Sundar Pichai: we’re still in the early stages of shopping and Youtube. However, we have seen that YouTube has good direct feedback in several categories, and our relevant experience can also be directly applied to the e-commerce field, which is a great opportunity. I also mentioned that search can quickly capture users’ shopping intention. YouTube is relatively long-term and needs to build brand awareness, create topics, etc., and this is another big opportunity. Today, in many areas, we have very attractive content. I’ve always felt that if we can match what the user is interested in and the content is extremely relevant to the user, then everything will work particularly well. YouTube itself has a lot of natural opportunities for commercialization, so I see e-commerce as a long-term opportunity.

I’m very excited about Google workspace. We have strong growth in two areas. I have mentioned the relevant data of meet. The average number of meetings per day is about 235 million, and the average duration is more than 7.5 billion minutes. Meet has grown significantly, along with Google documents, Google drive and chat. And Google’s workspace has also created an integrated experience. We have seen that, the response is very enthusiastic, and there is a great demand. Our goal is to accelerate the evolution of future work situations. And some of the trends we’re seeing right now will last for a long time to come. It also gives us an opportunity to re imagine what it’s like to work remotely, to work together, and to be productive. We are committed to being a leader in this area and seizing the opportunity.

Analyst: with regard to search, compared with today’s growth rate in January and February, that is, before and after the outbreak of the new crown disease, which areas of growth are more than the level of January? Is it that only the tourism industry is inferior to the level before the new epidemic?

In addition, you and apple have reached a search agreement. According to some other cooperation agreements mentioned in your blog on the official website, you don’t seem to lose much search volume as the business changes ownership. If the agreement changes, how many users of safari’s default Google search toolbar can you get back? Is this a big problem on the edge of life and death? Or is this a situation that you can face with ease?

Ruth Porat: with regard to your first question, we often mentioned that we have quite a wide range of global businesses, including a wide range of business areas, diverse customer groups, major regions, etc. In fact, our business growth is similar to the macroeconomic trend. We will not talk about the specific growth rate of a business because of its wide range.

Sundar Pichai: about search, I’ve been saying that we’ve always been committed to making our services accessible to users. Most of our partners choose us because we are the best search engine providers and users think that the search results we provide are the best. Therefore, the relevant needs are natural. We believe that we are right to invest in all platforms and we will always be committed to ensuring that we provide services to users everywhere, and we are focused on that goal.

Via Tencent technology read more: Alphabet:1Q20 First quarter revenue was $41.159 billion, up 13% year on year. Google’s parent company alphabet: 2q20 net profit was $6.959 billion, down 30% year on year Google cloud team plans to triple in three years Google cloud team plans to triple in three years Become the world’s most valuable company alphabet: in January 2016, Gmail’s active users exceeded 1 billion Baidu: 2q20 revenue was 26.03 billion yuan, with a year-on-year increase of 187%. Micro League: the adjusted net profit in the first half of 2020 was 52 million yuan, with a year-on-year growth of 77.4%. Gu Geyun’s latest valuation was US $225 billion or surpassing Oracle and IBM. Google: YouTube’s daily video playback volume reached 3 billion times

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