Google Nearly Doubles Profit, Digital Ads Red Hot

Alphabet Inc.’s Google tallied its highest sales growth in more than a decade and nearly doubled its profit in the third quarter, as smaller businesses poured money into digital ads aimed at customers whose purchases have shifted online, reports The Wall Street Journal.

The strong results underscored how the pandemic has turbocharged the company’s core advertising business. With retail foot traffic dwindling, marketers turned to Google to promote their products, delivering in a single year the kind of quarterly sales growth that the search giant typically records over a two-year span.

Alphabet said Tuesday that revenue rose 41% to $65.12 billion, its largest in 14 years. It posted a profit of $21.03 billion, nearly three times what it reported before the pandemic.

The red-hot digital-ad market has accelerated this year, with global spending on track to grow 26%, up from earlier projections of 15%, according to GroupM, a media-buying firm. Much of that windfall has flowed to Google, which has a dominant share of world-wide internet searches, digital navigation and online video viewership.

The company’s ad business, led by Search, Maps and YouTube, posted $53.13 billion in sales from advertising, a 43% increase.

Google said its profit for the quarter benefited from an accounting change related to depreciation of its servers and network equipment, which increased net income $460 million.

Much of the company’s growth has come from e-commerce advertisers eager to reach customers whose product searches begin online. The company joined with Shopify Inc. this year to simplify search listings and ad purchases for 1.7 million merchants. The effort, which aimed to enliven its e-commerce segment, has helped turn retail ads into Google’s largest growth contributor.

In recent months, the search giant’s retail-ad segment has benefited from the new privacy policy Apple Inc. rolled out. Since April, the iPhone maker has required apps to ask users whether they want to be tracked. The changes have weakened the performance of ads on Facebook Inc. and Snap Inc., according to ad buyers and smaller businesses. Many brands have shifted spending to Google as a result.

YouTube has been another major driver of Google’s advertising gains. The video behemoth reported sales grew 43% to $7.21 billion in the quarter.

The business is on track to generate nearly as much revenue this year as Netflix Inc., a subscription business valued at nearly $300 billion. The revenue fell short of Wall Street expectations and contributed to Google’s shares declining about 1% in after hours to $2,761.01.