Google Reports Strong Third-Quarter Advertising Revenue, Shrugging Off Apple Privacy Changes – Forbes

Google's advertising business brought in $53.1 billion during the third quarter, up from $37.1 ... [+] billion during the same period last year.

While some advertising-funded internet giants like Facebook and Snap Inc. are feeling the brunt of Apples recent data privacy changes, Google seems less worried.

Today, Google parent Alphabet Inc. reported a record $65.1 billion in revenue during the third quarter of 2021, with the companys advertising business increasing 43.2% to $53.1 billion. Quarterly search advertising made up the bulk of revenue with $37.9 billion in the third quarter, rising from $26.3 billion during the same period in 2020. YouTube ads accounted for another $7.2 billionup from $5 billion in Q3 2020and Googles ad network revenue brought in $7.9 billion.

According to Google Chief Business Officer Philipp Schindler, retail advertisers were once again the key revenue driver over the past three months followed by advertisers in media and entertainment, finance and travel industries. E-commerce and connected TVs are also fueling Googles growth. Schindler said YouTubes reach is becoming increasingly incremental to TV with connected TV being the fastest growing screen. Meanwhile, brands including Sephora, Target and Walmart have been experimenting with the companys shoppable live-streams.

The strong results come in the middle of an earnings season clouded by Apples recent changes to its data privacy settings. The iOS updateswhich allow users to opt out of letting companies collect their personal data and serve up hyper-targeted ads have prompted many on Wall Street and Madison Avenue to speculate about how adoption might damage the broader digital advertising industry.

When asked by an analyst whether Apples data privacy changes impacted Googles own advertising business, Alphabet Chief Financial Officer Ruth Porat said they had a modest impact on YouTube revenues, primarily in direct response. Schindler then added that Apples efforts are just one aspect of the many broader ecosystem changes that are underway.

Our focus is on supporting developers, small and large advertisers, creators, publishers, so that they are able to mitigate impacts to their businesses, Schindler said. We really see the future of digital advertising being built on advances in privacy-preserving on-device technologies which support the free and open internet and obviously a robust ads ecosystem.

Although Google was able to avoid any major impact, its rivals are facing setbacks. Last week, Snap Inc.s stock price plummeted 25% after missing quarterly revenue estimates by $130 million. On a quarterly earnings call with investors, Snap Founder and CEO Evan Spiegel said it underestimated the changes and that Apples new measurement solution did not scale as we had expected. However, he said the companys first-party data was still leading to conversions at similar ratessuggesting that the company would still find a way around the problems.

This has definitely been a frustrating setback for us, Spiegel said. But I think over the long term, these privacy changes and protecting privacy for users of iOS and, of course, the Snapchat community is really important for the long term health of the ecosystem. Its something that we fully support.

Facebook also blamed Apple for its slower-than-usual growth. On Monday, the social network reported third-quarter ad revenue of $21.2 billionan increase of 33% more than the same period last year. However, Facebook Chief Operating Officer Sheryl Sandberg told investors that if it wasnt for Apples iOS14 changes, we would have seen positive quarter-over-quarter revenue growth. The impactwhich Facebook began noticing in the second quarter before hitting critical mass over the past three monthsled to weaker ad-targeting that has driven up advertising costs along with making it harder to measure campaign effectiveness.

I think were certainly going to be watching how advertisers react to the challenges with the Apple platform and how that intersects with pricing as we get into the stronger demand season for Q4, Facebook CFO David Wehner told investors during a follow-up call. Because it's going to affect pricing and ROI, and when you have higher prices we'll just have to see what is the advertiser reaction in that environment, as it relates to the targeting on the iOS platform.

Other companies had fewer complaints. Earlier today, Twitter, which reported revenue and user growth that met analysts expectations, said the impact its seen from iOS changes has remained modest. However, the company said its still too early to know what the long-term impact might be.

Despite avoiding any major dents from Apples privacy, Google also faces a number of challenges on the regulatory front. On Friday, a U.S. District judge unsealed an antitrust lawsuit filed by more than a dozen state attorneys general alleging Google gave itself an unfair advantage through its digital advertising auctions that let the company win more auctions and charge far higher ad rates than its rivals. The lawsuit also alleges that Google colluded with competitors to rig parts of the digital advertising market and slow down various data privacy efforts from Apple and regulators.

As one senior Google employee admitted, [t]he analogy would be if Goldman or Citibank owned the NYSE, according to the lawsuit led by Texas Attorney General Ken Paxton. Or more accurately, the analogy would be if Goldman or Citibank were a monopoly financial broker and owned the NYSE, which was a monopoly stock exchange.

Google has disputed the lawsuit since it was originally filed in December. In a statement emailed to Forbes, a Google spokesman described the allegations as misleading and riddled with inaccuracies while claiming the company lets publishers keep more revenue than the lawsuit outlines.

In reality, our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world, the spokesman said. There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers.

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Google Reports Strong Third-Quarter Advertising Revenue, Shrugging Off Apple Privacy Changes - Forbes