Google Q4 revenues grow 24 pc, riding on mobile search and enterprise cloud

With cloud now a ‘billion dollar per quarter business’, Google plans to open five data centres across the globe in 2018. Mobile search, meanwhile, continues to drive ad revenues.

Tech giant Google posted a revenue growth of 23.7 percent in Q4 2017 (October to December) to $31.9 billion, with operating profits rising 11 percent to $8.76 billion. Google’s growth was largely driven by its ad business, particularly mobile search and YouTube, along with notable contribution from its enterprise cloud solutions.

Meanwhile, Google parent Alphabet’s revenues were up 24 percent year-on-year to $32.3 billion — a record high. Profits grew 15 percent to $7.7 billion, Alphabet revealed in the earnings.

Google also recorded good growth in the “other revenues” segment, which includes hardware (Pixel, Pixelbook and Home), Google Play (the digital app store) and Google Cloud. “Other revenues” for Q4 2017 stood at $4.6 billion, compared to $3.4 billion in Q4 2016.

Soaring ad revenues

Google’s burgeoning ad business grew 24.5 percent during the quarter to touch $27.2 billion. Mobile search and YouTube drove maximum growth in this segment. Paid clicks grew by 48 percent on Google sites and 13 percent on network member sites. Paid clicks is a model wherein advertisers pay Google each time a user clicks on their ads.

Along with search, YouTube too brought in significant ad revenues. Despite some large advertisers pulling out of YouTube in the wake of its child exploitation scandal, YouTube’s ad revenues soared with 1.5 billion monthly viewers watching 60 minutes of videos each day.

YouTube Go, which is optimised for low-bandwidth networks in countries like India, is now available in 130 international markets, and is expected to boost future revenues.

Google Cloud growth

The Q4 numbers are evidence that more and more businesses are buying into Google’s cloud services.

Google CEO Sundar Pichai said in the earnings call that Google Cloud, which also includes G Suite, has reached a “meaningful scale” and is now a “billion dollar per quarter business”. Meanwhile, G Suite (Gmail, Docs, Drive, Calendar) has four million paying customers.

Pichai, who has earlier stressed on Google’s AI-first approach, said, “We believe that Google Cloud Platform, based on publicly reported data for the 12 months ending December 2017, is the fastest growing major public cloud provider in the world. We are also increasingly doing larger, more strategic deals with customers.”

In Q4 2017, Google “forged new and deepened existing partnerships” with industry leaders like Cisco for open hybrid enrollments, Salesforce for customer insights and productivity, and SAP for AI and data insights across their products.

“These collaborations span our entire company from engineering integration to marketing programmes to joint sales, and they cover Google Cloud Platform, G Suite and Google Analytics,” Pichai said.

Google will continue to make significant investments on cloud in 2018. It has announced plans to open five more data centres around the world and has allocated $30 billion to the project.

Google CFO Ruth Porat said in the earnings call: “With respect to cloud, we’re seeing the benefits of a fully featured enterprise offering and an expanded go-to-market team, bringing our advantages in infrastructure, data analytics, security, and machine learning to more customers.”

New businesses

Google’s new businesses, which are categorised under “Other Bets”, posted a 49 percent growth in yearly revenues to $409 million. Google has also been able to bring down operating losses in this segment.

Growth in new businesses is being led by Nest, Google’s smart home solutions; Fiber, its TV service; and Verily, a service that utilises machine learning in healthcare.

Porat said, “Nest turned in a strong holiday performance in the fourth quarter across an expanded family of products in energy, safety, and security.”

In 2017, Nest products became available in 12 new countries, more than double the number in 2016. “The Nest team is very, very closely aligned with the Google hardware team. And we increasingly are collaborating on product development as well,” Pichai said.