Google’s Onerous Balancing Act Between Privacy and Profit
Google’s parent company Alphabet is in a rare and potentially precarious position: It must answer growing public calls for privacy while placating governments eager to maintain market competition, all while continuing to impress Wall Street with its growth.
The search giant earned $45.8 billion in revenue in the final quarter of 2019, up from $39 billion 12 months earlier, with the vast majority of its income ($37.9 billion) generated through ad spend, according to Alphabet’s latest financial filing.
Alphabet’s total revenue for the period were just over $46 billion as “other bets” continue to increase as a proportion of total earnings, but ad spend is still very much crucial to the corporate giant’s bottom line.
Placating different lobbies
Much was made of the fact that Google broke out its YouTube earnings for the first time, with ads on the video-sharing platform generating $15 billion in 2019.
That makes YouTube alone the third largest seller of advertising outside of China, according to one agency source speaking on condition of anonymity Google’s power as such a large media seller makes buyers often unwilling to go on record. The numbers make for impressive reading, and despite fluctuations in its stock price, analysts continue to recommend Alphabet to investors.
On the company’s subsequent call this week, Google CFO Ruth Porat said YouTube’s revenues were up 30% year-on-year, with “the majority of this revenue paid out to content creators.”
Wall Street sources, who requested anonymity due to their companies’ communications policies, noted how this is typical of the kind of tone Google will try to strike in portraying itself as a company that gives back while continuing to grow exponentially.
Some sources even speculated that Google breaking out its YouTube revenue for the first time may be in anticipation of the upcoming changes to Google Chrome having a sizable effect on its Google Marketing Platform offering, which relies on third-party cookies to power its ad-tech services for both media buyers and publishers with tools such as its ad exchange, Display & Video 360, and Google Display Network.
The proponents of such theories rationalize that Alphabet could justify jettisoning Google’s ad-tech offering to Wall Street, as long as the company could balance it as a means of answering calls for privacy while offsetting the (potential) financial hit with impressive YouTube growth numbers.
The industry’s most precarious balancing act
Alphabet is about to enter one of the most potentially fraught periods in its history, as it must successfully satisfy public demand for data privacy while fending off antitrust scrutiny.
Late last month, Google confirmed what many had expected for almost a year with the announcement that it will no longer support third-party cookies in its market-leading Chrome browser, a move many interpreted as an olive branch to the privacy lobby.
However, while this move maybe welcomed by privacy advocates, it could decapitate others, particularly those that would be defined as programmatic players. Ad-tech experts have been up in arms in recent months, with governments across the world taking note.
Media reports have claimed that Justice Department officials are meeting with state attorneys general this week to investigate Alphabet’s dominance of the online ad business. At the core of the regulators’ dissatisfaction are allegations regarding search bias, advertising and Google’s control of the Android operating system, according to reports.
Such is the intricacy of the narrative Google has to weave.
Google’s latest communications offensive
Since Google’s cookie changes were first announced, the online advertising giant has been keen to voice how it differs in its philosophy compared with its contemporaries. Apple, with its intelligent tracking prevention rollout in Safari, new market entrant Brave, and Firefox provider Mozilla have all been keen to highlight the privacy vulnerabilities of ad tech, especially to lawmakers.