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> I think it is convenient Did you intend to imply that the revenues would have declined without the pandemic? That seems unlikely. https://www.statista.com/s

> I think it is convenient Did you intend to imply that the revenues would have declined without the pandemic? That seems unlikely. https://www.statista.com/statistics/507742/alphabet-annual-global-revenue/ https://www.statista.com/statistics/507742/alphabet-annual-g... Sorry if I've read you wrong but that is the typical meaning of "convenient" in a sentence like the one you wrote.

ChuckMcM 6y ago
Yes, I did mean to imply that Alphabet's revenues would have declined anyway. I've been watching Google's financials fairly close from when I joined the company in 2006 onward (I left in 2010). The driver of Google's profits has always been search advertising, nothing else in their portfolio has the margins that search ads had at one time. At the time of Bing's introduction (2011) Google's search advertising margin started to fall just as Bing's was increasing. That has continued to this day. To counter that, Google first started taking revenue away from their AdSense sites, then they started adding more paid placement and ads on their own sites, then they started "pre-showing" content in the search results that kept people from going to a web page that might be showing ads[1]. They introduced additional "taxes" (really fees) for people selling things to insure that they appeared in the top third of Google's search results even if they were the best organic result for the product being sold. All of these moves have kept the revenue growing at the cost of increasing user dissatisfaction with the quality of the service. Left to their own devices, users would migrate to other services but here Google has been aggressively paying for search portals (whether explicit "web search" pages, or implicit like a search bar on your phone) to send them traffic rather than send it to Bing. They have spent a record amount of money over the last year buying this sort of traffic. They can't keep paying more for traffic, eventually that gives them negative margins on search ads. While as Bing's cost per click grows they can pay more for traffic and still make their numbers. Google is having a harder and harder time squeezing more ads onto their pages without completely destroying the user experience. This trend means that eventually, they are going to run out of options, and their revenues are going to go down. Look at their financials and they don't have another business unit that can pick up the slack. There hasn't be a particularly novel improvement to search engine ranking over the last 10 years at least, and existing patents on maximizing ad revenues are reaching their expiration date. If Google doesn't find a way to re-invent itself it will go the way of tech giants before it, build a shiny headquarters monument to itself and then expire in a slow and painful death. I used to remind people when I was there that the "plex" was the headquarters for SGI, a Tech Giant before it was dead :-). It will be sadly poetic if Google has to sell off their shiny new headquarters to stay alive another couple of years down the road. [1] Since Google gets paid significantly less for ads on third party pages, even if they supply them, it is a win for them to keep people on Google's internal sites.
- draw_down 6y ago
  Nice analysis, thanks.
- asdfasgasdgasdg 6y ago
  I'm sure Google's revenues would have gone down someday without the pandemic. But it would be a very surprising thing for them to suddenly go from record growth one year to down the next without any exogenous events.
  - ChuckMcM 6y ago
    As I see it, it sort of hinges on the constraint of what is exogenous. Clearly the privacy initiatives in Europe and California have cost them data revenue, the various fines they have been paying have cost them revenue. Is it still exogenous if it is indirectly a result of what they are doing? (this is actually a serious question on how to draw the line there) They also have a history of burning through money (both opex and capex) which makes them very very susceptible to revenue dips. So my expectation has always been they would post some record revenue one quarter, and then the gas would run out of their various tricks and they would post flat to down revenue the next. That it went from record to year over year down in a single quarter, sure. But during the "Great Recession" in 2009 they didn't even go flat, so perhaps a more accurate statement is that their resiliency has been removed. I'll put a prediction here we can come back and look at and see how wrong I was :-). If they have more than two quarters that are down year over year, they will have a significant cost restructuring activity of either a layoff, or selling off one of their sub-businesses, or both.

ChuckMcM 6y ago

Yes, I did mean to imply that Alphabet's revenues would have declined anyway. I've been watching Google's financials fairly close from when I joined the company in 2006 onward (I left in 2010). The driver of Google's profits has always been search advertising, nothing else in their portfolio has the margins that search ads had at one time. At the time of Bing's introduction (2011) Google's search advertising margin started to fall just as Bing's was increasing. That has continued to this day. To counter that, Google first started taking revenue away from their AdSense sites, then they started adding more paid placement and ads on their own sites, then they started "pre-showing" content in the search results that kept people from going to a web page that might be showing ads[1]. They introduced additional "taxes" (really fees) for people selling things to insure that they appeared in the top third of Google's search results even if they were the best organic result for the product being sold. All of these moves have kept the revenue growing at the cost of increasing user dissatisfaction with the quality of the service. Left to their own devices, users would migrate to other services but here Google has been aggressively paying for search portals (whether explicit "web search" pages, or implicit like a search bar on your phone) to send them traffic rather than send it to Bing. They have spent a record amount of money over the last year buying this sort of traffic. They can't keep paying more for traffic, eventually that gives them negative margins on search ads. While as Bing's cost per click grows they can pay more for traffic and still make their numbers. Google is having a harder and harder time squeezing more ads onto their pages without completely destroying the user experience. This trend means that eventually, they are going to run out of options, and their revenues are going to go down. Look at their financials and they don't have another business unit that can pick up the slack. There hasn't be a particularly novel improvement to search engine ranking over the last 10 years at least, and existing patents on maximizing ad revenues are reaching their expiration date. If Google doesn't find a way to re-invent itself it will go the way of tech giants before it, build a shiny headquarters monument to itself and then expire in a slow and painful death. I used to remind people when I was there that the "plex" was the headquarters for SGI, a Tech Giant before it was dead :-). It will be sadly poetic if Google has to sell off their shiny new headquarters to stay alive another couple of years down the road. [1] Since Google gets paid significantly less for ads on third party pages, even if they supply them, it is a win for them to keep people on Google's internal sites.

draw_down 6y ago
Nice analysis, thanks.
asdfasgasdgasdg 6y ago
I'm sure Google's revenues would have gone down someday without the pandemic. But it would be a very surprising thing for them to suddenly go from record growth one year to down the next without any exogenous events.
- ChuckMcM 6y ago
  As I see it, it sort of hinges on the constraint of what is exogenous. Clearly the privacy initiatives in Europe and California have cost them data revenue, the various fines they have been paying have cost them revenue. Is it still exogenous if it is indirectly a result of what they are doing? (this is actually a serious question on how to draw the line there) They also have a history of burning through money (both opex and capex) which makes them very very susceptible to revenue dips. So my expectation has always been they would post some record revenue one quarter, and then the gas would run out of their various tricks and they would post flat to down revenue the next. That it went from record to year over year down in a single quarter, sure. But during the "Great Recession" in 2009 they didn't even go flat, so perhaps a more accurate statement is that their resiliency has been removed. I'll put a prediction here we can come back and look at and see how wrong I was :-). If they have more than two quarters that are down year over year, they will have a significant cost restructuring activity of either a layoff, or selling off one of their sub-businesses, or both.