Alphabet’s YouTube Subs at $3B Run Rate, Eyes ‘Better’ Commerce Experience

With a bit more granularity than has been seen in past quarters, Google’s parent Alphabet reported fourth-quarter results that showed continued gains in core search and YouTube businesses, while cloud outpaced the growth rate of those core operations.

In terms of headline numbers, net revenues came in at $46 billion, which missed the Street by roughly $790 million.

Drilling down a bit, Google Search revenues gained 16.7 percent to $27.2 billion. YouTube advertising revenues were up nearly 31 percent to $4.7 billion.

Earnings per share were $15.35, which in turn, was better than expectations of $12.53 per share.

And with a nod toward new disclosures of different operations and business lines, the company said that cloud sales were up 53 percent from last year to $2.6 billion. The disclosures on cloud and YouTube take those operations out of what had formerly been known as “other” revenues. CEO Sundar Pichai said in a statement that YouTube is at a $15 billion annual ad revenue run rate, and Cloud is on a $10 billion annual run rate.

Pichai said that YouTube music has logged 20 million paid subscribers and YouTube TV, 2 million paid subscribers.

With a bit more detail on searches, Pichai said artificial intelligence- (AI) powered tech now handles more than 10 percent of total searches.

On the conference call with analysts, Chief Financial Officer Ruth Porat said that there is “substantial opportunity” in direct response and brand advertisers. She said on the call that direct response has been growing significantly. Subscription revenues are at a $3 billion run rate, as measured annually.

In reference to YouTube monetization, one analyst estimated that with two billion users, there are about $7 to $8 (in annual revenues) per user.  The CEO was asked if there was room to “raise that when compared to other social networks?” Pichai responded that “I do think there is a lot of opportunity ahead … increasingly, I think, when you look at the fact that people are consuming a lot of goods and services,” there is “more room” for YouTube is creating “better commerce experiences.”

Other Bets, which include operations such as Waymo autonomous vehicles and drones, logged $172 million in the last quarter, up 11 percent year over year. Management said on the call that some of the Other Bets operations have reached the point where they can partner with third-party firms.

In response to a question about payments, Pichai said on the call that people are transacting across Google offerings and said there has been “traction” across 18 months, and that India has proven to be a market where the firm has learned much.

The cloud platform remains an area of continued investment as infrastructure and data services are strong. Amid what Porat termed a competitive market, capital investment will see more weight focused on data centers.

Management also said the number of Google Cloud deals had more than doubled year over year.

Separately, Pichai said that Google Play has 2 billion monthly active users, and developers have earned $80 billion cumulatively.