Google Parent Alphabet Hits $21B In Q1 With Little Impact From YouTube Snafu

Google's parent company Alphabet beat Wall Street’s earnings expectations for the first quarter, racking up $24.75 billion in revenue versus the Street's forecast of $24.17 billion -- up 22% from the same period a year ago. It reported net income of $5.4 billion -- or $7.73 per share -- up from $4.2 billion, or $6.02 per share, from the year-ago period.

Advertising revenues contributed $21.4 billion, up from $18 billion a year ago. Google appeared unmarred, financially, from the fallout around ads on YouTube appearing next to offensive and hate-filled content. The controversy surfaced after a Times of London investigation in February caused many global advertisers to suspend ad campaigns on the user-generated video portal.

Despite the ongoing controversy and moves to put brand safety measures into place on YouTube, ad revenues grew in the first quarter in all locales: the U.S., Europe, the Middle East and Africa, Asia-Pacific, and the Americas. And Alphabet shares are up more than 23.5% over the past year, and nearly 12.5% so far this year.

Advertiser suspensions on YouTube may not have a material impact until the second quarter, according to Henry Kargman, CEO and founder of Kargo, a moble ad-tech firm. It’s also the case that YouTube, where the trouble is, represents only a portion of Google's $21.4 billion in digital ad revenue. “YouTube is only one part of Alphabet’s revenues, search is still very strong and a big part of the ad revenues and not affected by the ad boycott,” Kargman said.

“The bigger question is, is there a tarnish on the Google advertising brand that will get advertisers to say ‘we will run on Google and YouTube but we want to look for alternatives in the market because we can’t have a big concentration of dollars on YouTube?” Kargman said. “I do think all of the brands that suspended advertising will return to Google. The question is, will they ever return at the same scale and desire to invest a big percentage of their ad budgets?”

Kargman pointed out that 80% of digital advertising growth in the market is consumed by revenues going to Google and Facebook. Brands may start to ask what the proper allocation of their digital ad spend should be.

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