Alphabet Third Quarter 2021 Results [pdf]
abc.xyz
abc.xyz
So who is actually seeing these ads? How can those numbers be going up?
I understand, intellectually, that not everyone thinks like me. But I don't fundamentally understand why people allow ads on their devices when they can prevent it. Then again, I don't understand a lot of behaviors people exhibit.
Also, the number of people using ad blockers must be extremely low. Even crazier, most people who I talk to about content blockers on iOS zone out of the conversation before I can even get to how easy it is. They do not even care that much about the ads or notice how annoying they are.
Then again, many or most people still watch live sports and old school TV channels, which are chock full of ads. I cannot even stand too obvious product placement, much less ad breaks. So while I will go out of my way to remove ads from my life, there are probably 9 others who will not spend a single second thinking about it.
I don't pitch Signal, but when I do see it pitched those that are most successful pitch 1 directly useful feature as why you should install it.
Eg: Get Signal, our videos won't look like a fuzzy potato lens image
Remember, your reason should be a problem the person your pitching to has faced and would like to see fixed. If they are having trouble with a different issue, pitch that instead!
Everybody is different. Back in the early 2000s when I used to watch TV, I actually enjoyed ads, because they tended to be more entertaining than the TV shows themselves (remember the Budweizer lizards and eTrade babies). Even when online ads because popular, when they were still contextual, I really did not mind. It was only when ads began to follow people around online that I put an end to it.
But I still watch live sports - only online, since I no longer have TV service. I get around ads on NFL games by having more than one game streaming on different tabs, then switch to the one that's not in an ad break.
Online, there are no ads during football (the real one), tennis and volleyball matches, so I have very little to complain about.
Advertising spend could be going up without more people seeing the ads. Since businesses compete for limited advertising space, they are likely to keep increasing the size of their bids for click.
Alphabet's revenue could be growing as a result of eroding the margins of other businesses, who are now forced to spend more money for the same amount of clicks.
I don't claim this to be the exact scenario that reflects reality, but it is a very plausible scenario nonetheless. A nice little lesson in why lots of things are zero-sum (even though we'd like to pretend they aren't)
* Some % of people install adblockers, but that number doesn't grow that much.
* There are more people being reached by advertising than ever before. 7.7 billion people in the world & still only about half are online. So overall the number of users they're reaching is growing even if they lose some to adblockers.
* You currently have to install an adblocker per device or even application (unless you are in the minority putting it on your router at home). This means that adblock rates vary and a user installing an adblock somewhere doesn't mean that user is globally lost from advertising reaching them somehow.
* There are multiple modalities for ad networks (app, web pages, etc etc). Google is involved in all of them. Ad blocking has variable performance across those networks unless you really know what you're doing (e.g. in-app advertising is very hard to block on iOS).
* The price of ads can vary driving up revenues. Not all ads are priced equivalently so Google can drive value that way by making the ads more valuable to advertisers or making more expensive ads more appealing.
* Inflation will naturally increase total dollar amounts even if everything else remained constant.
> don't fundamentally understand why people allow ads on their devices when they can prevent it
The market share of iOS also has increased a bit, and iOS does not allow ad blocking very easily. You have to configure some sorta DNS-based ad blocking, which is harder than the traditional desktop firefox/chrome adblockers to install.
Usage of computers has also shifted towards phone/tablet apps, away from desktop browsers... And ad-blocking in apps is hard to impossible compared to on desktops.
I'm not surprised people continue to see a lot of ads as we move from the web, where mature ad-blockers exist, to apps, where ad-blocking is harder and less mature.
Even very technical people usually don't bother with pi-hole and see ads in free android apps.
Oh, and also, there are occasionally cases of an ad-blocker removing itself somewhat, i.e. adblock plus used to be the go to recommendation for ad-blocking, but they started allowing google ads through in an update (https://adblockplus.org/en/acceptable-ads)... so maybe someone installed adblock plus because that's what they remembered from 10 years ago (and adblock plus has better SEO than ublock origin too), and thus still gets google ads now.
Are you considering installing a content blocker not easy? Or not ad blocking? Firefox Focus is free and a few taps away from the app store.
Seems easier to me than installing ublock origin on desktops. Which people can easily be misled into installing ublock, or adblocker, or any the other scammy ones that do not really block ads or do something else nefarious. It is harder for a non technical user to get fooled by an iOS content blocker.
If you google how to install an adblocker on iOS, you get garbage results which will mostly only work for safari, and will mostly not block google's ads ("acceptable ads").
If I google 'ios ad blocker' and install the apps in the order recommended, I think I'd have to go through ~10 garbage apps before I got to firefox focus.
... And I think for a lot of people, firefox focus isn't viable because they want their chrome bookmarks to sync etc.
When I said "DNS-based ad blocking, which is harder than the traditional desktop firefox/chrome adblockers to install.", I was mostly thinking of installing pi-hole since that's the reliable way to block stuff on iOS, since otherwise the matrix of content blockers is a total mess. I'll stand by pi-hole being too much for most people.
Is there a way?
Similar issue on Android, you need a DNS based or VPN based solution to block ads in apps. Thats probably too technical for 99% of the market.
More auction participants mean higher bids.
Removing match types such as phrase, while automatically shifting phrase to broad modified helps increase their fill rate & number of participants per auction.
Eliminating second price proxy auctions in display ads (search likely soon to follow?) will likely yield measurable increases in CPC.
A few years back they went from up to 10 ads to 7 on most-- they have that dial to adjust if necessary.
Products like Google Shopping take up more and more space on the SERPs and are typically pay to play. They have higher CTR due to carousel images & once you click into that ecosystem, nearly every click yields ad revenue.
Chrome behavior with URLs is conditioning users to search for brands (versus typing in the full domain name), who then have to pay to defend their brand terms from brand poachers.
That's not really how auctions work. Raising the price floor would just exclude ads with CPCs below the floor from paying, and since they're already getting paid for the maximum CPC bid at the time anyways they would just make less revenue.
If they messed with quality score discounts in an exploitative way, the entire billion-dollar SEO industry watching it would notice and cry foul.
Bid floors will exclude ads from showing unless a certain ad rank is met. If users want to continue (or start) receiving impressions, they need to meet the adjusted threshold. This won't be as common on terms like "chicago movers", but when you get into the longtail and use an Alpha/Beta structure, it can be relatively common to get a "bids below threshold" for lower volume terms that have less (think <5) auction participants as shown in search insights & sampling the SERPs manually. When you get into these niche terms, you assume terms will be cheap due to lack of participants, but that isn't typically the case.
For the long-term growth is constrained by the sum of all campaign budgets, and those budgets are set by advertisers themselves.
What the company needs to do is to keep advertisers happy enough to have them increase the budgets, and also prevent the software engineers from breaking the system with bugs enough that the advertisers would walk away.
2. We're still early internet, and people rely on the internet more and more (and therefore search more). E.g. in Covid, people are likely transitioning more of their life online, which is good for Google.
3. As companies and the broader economy do better, companies will invest more in growing themselves, often by buying more ads. Companies are doing very well right now (see stock market), so there are more ads being bought AND the price per ad will likely go up because there is more competition.
4. There is still plenty of untapped ad real estate for Google to monetize as well (searches that could generate ad revenue, and web pages that can surface better ads).
This combination is great for Google.
2. Online advertising still have a room for better optimization in many ways. You'll be surprised on how primitive bidding systems are for a large fraction of advertisers. Better bidding means ads more likely to convert.
Also note that HN readers are extreme outliers compared to usual people who actually spend money on ads. My gut feeling is that perhaps >90% of people don't care much about whether it's ads or not if it seems relevant enough for them.
Google has built a nice perpetual money machine by creating a shadow copyright system where you don't need to own the rights to someone's name, you just need to have more money than them.
Most people wouldn't know where to start to install an ad blocker.
They don't even understand the concept, much less know that it even exists.
(aside: what ads? why are you surfing so many sites with ads where they're a nuissance? I don't even notice them on the few sites I come across them/what I do see is manageable, no plugins or extensions needed ever)
Search is the key - so many listings intermixed with search results, and search is a major part of everyone's life. And whether people are clicking them or noticing them is another thing but alot of ad sales are on the page impressions alone, so that's not nothing based on billions of daily searches.
Hacker News isn't representative of mainstream society. ~27% of Internet users block ads.[1]
> How can those numbers be going up?
People continue to shift various activities online. Against, HN isn't representative here -- most of us probably already do most things online. There's still a very large chunk of time watching broadcast television, reading printed (offline) media, etc.
[1] https://www.statista.com/statistics/804008/ad-blocking-reach...
The reality is vast majority of people are fine with some ads.
Not to mention Ads are not just on the Web, but also In-App as well. In App Ads works way better than on the Web as it function more like TV ads. Especially as newer generation trends towards online media consumption vs old TV box. These are just Ads revenue shifting from TV to Youtube.
I dont think the Fundamental of Ads has changed much at all. It might have changed medium, but ads, from a marketing and product strategic perspective remains pretty much the same as in the 80s.
But then again, this is HN, defending Ads is contrarian.
I can't prove the scale, but I believe the op (or was it gp?) is right and those funds, to some extent, went directly into stocks, real estate, luxury automobiles, luxury watches, artwork and other assets, and a large percentage of the remainder found its way to those same places indirectly.
I have no concrete evidence or source for this, but I don't think my friends are unique here. For as many businesses as you heard were struggling there were countless others doing ok or even well during the pandemic.
Just trying to offer a different perspective on your comment.
"Alphabet has been viewed as a key beneficiary of the **reopening trade**, given it stands to gain from a pick-up in travel-related searches and advertising on Google Search." (** emphasis mine **)
Source: https://finance.yahoo.com/news/alphabet-google-reports-q3-20...
Conditions changed.
people working remote
Social is just (fom a business perspective) a tool for getting an audience. The thing both Google and Facebook are selling is advertisement placement. Winning in one area of free “services” to build an audience to deliver ads to but not winning in actually selling ads…isn’t winning.
I was one of those googlers who, when Plus was announced, wondered "why aren't we announcing an AWS competitor?"
Google can walk and chew gum at the same time.
As I recall from my outside/user perspective: Google Plus pretty much co-opted the entire organization in an supposed "all hands on deck, existential fight" against Facebook. Every product and feature had to have a "social" layer (including GMail!); YouTube even adopted a "Real Name" policy but still amazingly managed to worsen the comment system.
Can you imagine what a similar level of effort on the cloud would have produced? Maybe they wouldn't be a distant #3 in that space today.
Employees are a company's most valuable resource. A company looking to grow and innovate must take care of its employees and part of it is respecting their time.
4 day work weeks causing no change means those engineers weren't productive in the first place. Which, in my experience, is the case in a lot of FAANGMULA teams.
I'd bet that Google & Facebook's current run-up is largely driven by inflation and higher ad prices. FB even said as much in a recent earnings call. Jerome Powell did more for their business than any employee up through the CEO did.
If there were 100 good search engines the price for advertising would be 90% lower
Would it really be that much though?
I thought search ads were auctions - i.e. competition for impressions/clicks directly correlates to the price of advertising.
If you have search users distributed across 100 platforms, the competition for impressions/clicks is going to be super low on all platforms, but you'd have to advertise on 100 platforms to get the same level of engagement, adding it all back up but with 100 middle men this time.
Why do you think that? The revenue is determined by the number of searches showing ads, the click-through rate, and the cost per click. The total across all companies would clearly not change for the first two metrics. Would the cost per click change? Given it's determined by an auction, I don't see how it could change. If you have an incentive to bid $1 on an ad on a single site with 100x traffic, you'd be equally willing to bid $1 on each of 100 separate sites with 1x traffic.
Is it possible that those cheaper ads could create more demand for ads somehow? It seems hard to believe it could. Either it's a search term that people were already willing to buy more expensive ads for, and are now just happy to pay less, or it's a search term that nobody was willing to bid even minimum price for.
What's actually going to happen in your scenario is that company A loses 90% of their revenue, goes bankrupt, and their domain is sold for a fair price to Company B or one of the other 98 remaining competitors.
And the number of ads and hidden ads would be like Cable.
If there were 100 good search engines for end users, but opinions of different users on quality were highly correlated, the traffic would be very disproportionately on the one that was perceived as even very slightly better.
And they’d make the bulk of the advertising dollars.
And they’d have the bulk of the money to throw at improvements.
And the next year, unless some competitor got more access to outside investment to make up for that, the gap would be bigger, they’d have even more of the search audience, and even more of the advertising money, etc.
When you can’t sell your slightly-less-good product for a lower price to make it value-competitive to slightly-more-good one, there’s very little reason for all the users not to go to the slightly-more-good one. With free services given away to get an advertising audience, that makes slight advantages very prone to positive feedback loops.
What does this mean? The dollar didn't inflate 68%.
If you mean that companies are investing more capital into advertising because capital markets are looser, sure, but why is that a bad thing again?
a.) close to the point where the money is injected
b.) have quick-adapting prices, ideally ones where competitors bid against each other
c.) are dominated by 1-2 firms with little competition, so they have pricing power.
Google and Facebook tick all the boxes. In COVID money was injected directly to the consumers (thanks to stimulus payments) and to small or mid-size business (PPP loans). Google and Facebook run up-to-the-minute ad auctions, so prices adapt immediately to additional money becoming available. And they have little real competition, so it's not like they can be undercut by competitors.
By contrast, wages (for example) a.) require that your employer have more money, which generally requires that it have trickled down through the whole value chain b.) get updated usually once per year and c.) generally require that your competition also decide they're going to ask for more money too, less your employer just decide to employ someone else. That's why wages are often the last and stickiest place that inflation shows up.
The general phenomena of certain businesses being able to raise prices earlier, faster, and more than others in response to rising money supply is called the Cantillon Effect, and is a pretty fertile ground for making lots of money in an inflationary environment.
The rest is wrong - you can look to an economist https://www.themoneyillusion.com/it-really-really-really-doe... if you want an explanation.
I'll not there is a tension between 2 and 3 as highly competitive markets tend to not have sticky prices.
tl;dr You advance a claim of strong monetary non-neutrality. I think that outside of sticky prices, your claim is overstated.
Does anyone know what the observation was here that made this possible? Have Google's internal workloads not grown in size as quickly as they thought, or is this a "Moore's law is slowing down" thing?
I wonder if this was Google's response to the chip shortage? Maybe the cost/benefit (and just sheer inability to get certain parts) made them hold on to hardware for longer.
Extending the life of an asset would affect the depreciation schedule, which would affect when depreciation is recognized / recorded on their books in a given tax year.
If Alphabet wanted to prove they lasted three years, they would have found a way to prove it. Auditors don't go around challenging on things like this. In particular, they don't go around challenging companies on depreciation because that is a key lever that management can pull if they need to hit numbers.
It is very difficult to discern exactly why they will have done this but the functional answer is: they have done this because they needed earnings to increase. In this case, it looks like the difference between a 15% and a 20% beat (I believe the change was made in January, I think they had quite a big beat in that quarter after some flattish momentum, middle of the year very strong anyway).
I worked in audit for several years and the auditors will challenge any estimate made by management that the auditors deem material to the financial statement readers. And the useful life of how long computers last is an estimate by management. While at most companies useful lives might not be an estimate worth looking at, Alphabet has enough computers for this to be a material estimate (likely due to GCP) that is subject to management bias. The public auditors are there to ensure (to a reasonable extent) that management can't manage earnings by changing estimates like this.
Density is an issue for people who are still renting from Equinix.
Why upgrade to the latest intel CPU when you get a paltry 100Mhz clock increase for the bother? May as well wait another year if 3 year old CPUs are pretty much the same performance as current models (give it take a few %)
There are still Sandy Bridge CPUs available in GCE. Sandy Bridge came out in Q2 2011.
What you are seeing though is the trick they used to make 'net income' pop. Let's say they had a million servers and a server costs $5K each. When depreciated at 3 years that is $1.6 billion dollars a year of depreciation. But you stretch that out to 4 years and now its only $1.25 billion dollars in appreciation. Since depreciation is subtracted from revenue you just "bumped" up your revenue by $350M and you didn't have to do anything at all (except change how you treated your assets).
That they had to resort to this level of shenanigan to get their revenue numbers up is interesting to me.
No, you bumped your net income. Revenue is unaffected by the depreciation change. Revenue is up 61%.
Also, nobody would be fooled by an accounting trick like this. Analysts routinely compute EBITA, earnings before interest, taxes, and depreciation, exactly for this reason - filtering out the more purely financial/virtual expenses that are less informative for understanding the core business.
They likely did it because you're required to report things like depreciation in a way that reflects reality. There could be tax implications for instance, since you can count depreciation expenses against your taxable earnings (though often companies maintain separate depreciation accounting for financial reporting vs taxes due to the different rules for each).
When I was younger, I took an accounting class from Santa Clara University (it was part of their Executive MBA program although I did not get an MBA) because I knew that I'd like to start my own company some day and needed to know how accounting worked.
> Also, nobody would be fooled by an accounting trick like this.
The course specifically covered "accounting tricks" that would create the most favorable impression in the eyes of the public and in the eyes of the analyst community. Playing around with depreciation rates was one of them. The assertion in class (which I've never had a chance to test) was that the IRS rarely, if ever, cared about your depreciation tables. That was damn close to 20 years ago so it most certainly could be different now, and I am not a tax accountant. If it has changed since then I am sure someone who has taken the class will correct me.
I don't think it "fools" analysts, but I suspect they might trade on an understanding that retail investors might have a different take on what was reported than what the analysts read.
https://www.convergedigest.com/2021/07/google-extends-deprec...
Edit: possibly not quite but almost certainly 1/2% excluding China.
It also doesn't tell us much other than Google and Facebook are large companies with significant earnings. You can probably provide a similar percentage for VW/Toyota, Boeing/Airbus, Walmart/Amazon, or any other pair of large companies that are the leaders in their respective markets. Indeed, if you lumped the entire Fortune 500 together, they're probably make up a sizable portion (if not the majority) of world GDP.
Seriously though, Wal-Mart has $500 billion revenues but it's not growing at the rate of these companies. By lots of metrics these companies are increasingly globally significant in a way that most of the examples you quote aren't.
Because I interpreted it 1 or 2% of world GDP.
Every so often I'll google something like Criminal Defense Attorney, send money, or file taxes and click on the highest ads.
The original poster is deliberately searching for some of the highest cost per click ads [1]. They have no intention of using these services, and they're moving lots of money from the ad purchaser to Google. Up to $50 per click.
This person owns stock in Google and has a vested interest in seeing their revenues go up.
These effects are minuscule, but it's not far off from stealing a furniture item every time you go to Target. Someone is paying for these and it has a nonzero effect on Google stock.
[1] https://www.wordstream.com/blog/ws/2017/06/27/most-expensive...
What about owning McDonalds stock and buying dinner?
Obviously fraud is not easy to label.
Revenue up 41%!! Incredible for an already very large company.
Op Margin also up to 32%?
When you realize how hard walmart and friends works for every point of margin and growth - these guys are literally printing millions.
They are also doing a good job at turning unsellable searches into sellable searches with their suggested search queries.
Google Cloud Revenue went up from $3.4 billion for Q3 2020 to $4.9 billion for Q3 2021
Google Cloud operating losses went down from $1.1 billion in Q3 2020 to $640 million in Q3 2021. (Though it looks like this change is almost exactly accounted for by a change in depreciation expense due to revised estimate of the useful life of servers.)
So they are bringing in significantly more money through the front door with Cloud, though they are still losing money (either about the same or half as much, depending on how you look at it) on Cloud.
Good point. Not sure why I miscontextualized that number.
We empower the wrong things..
Now, what value do those systems provide? I would definitely be living a much different (and likely worse) life if I didn't had access to the Internet and systems like those since middle school.
wikipedia actually is free, and we do not empower it for the value it provides to our society