YouTube Is a $15 Billion-a-Year Business, Google Reveals for the First Time

Nick Statt, reporting for The Verge:

YouTube generated nearly $5 billion in ad revenue in the last three months, Google revealed today as part of parent company Alphabet’s fourth quarter earnings report. This is the first report under newly instated Alphabet CEO Sundar Pichai, who took over as the chief executive of the entire company late last year after co-founders Larry Page and Sergey Brin stepped back from day-to-day duties.

The announcement marks the first time in YouTube’s nearly 15 years as a Google-owned platform, since Google bought the website in 2006 for $1.65 billion, that the company has revealed how much money YouTube-hosted ads contribute to the search giant’s bottom line. On an annual basis, that makes YouTube a $15 billion-a-year business that contributes roughly 10 percent to all Google revenue. It also makes YouTube’s annual earnings nearly one fifth the size of all of Facebook’s.

Why release this now? Speculation centers around the fact that Alphabet’s revenue was $800M less than expected, even though profits beat expectations. Perhaps Alphabet is now breaking out revenue by product to emphasize that they’re not solely dependent on search.

Update: Jeremy Owens, writing for MarketWatch:

Revenue-recognition rules that were approved in 2014 and went into effect at the end of 2017 call on companies to report financial results to their investors in the same manner that they are reported to the main decision-maker at the company, typically the chief executive. Basically, if a CEO sees numbers for a large segment of the company, the company should be reporting that segment’s results to investors.

As the revenue-recognition rules were being put in place by companies in 2017 ahead of the deadline, the Securities and Exchange Commission entered into communication with Alphabet specifically to discern why it was not providing revenue numbers for its segments, mentioning YouTube, Google Cloud and some other businesses, such as hardware. Google responded by saying that its chief decision-maker, Alphabet CEO Larry Page, did not see results parsed to that level, though Google CEO Sundar Pichai did.

★ Monday, 3 February 2020