Q4 2020 Alphabet Inc Earnings Call
[music].
Welcome everyone and thank you Christine.
Any buyer or the alphabet fourth quarter 2020 earnings conference call. At this time, all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on you touched on the telephone.
If you require any further assistance please press star zero.
I'd now like to hand, the conference over to your Speaker today, Jim Friedland Director of Investor Relations. Please go ahead.
Thank you good afternoon, everyone and welcome to alphabet fourth quarter 2020 earnings conference call with US today are Sundar Pichai Philipp Schindler and Ruth correct now I'll quickly cover the safe Harbor some of the statements that we make today regarding our business operations and financial performance, including the effect of the COVID-19 pandemic.
On those areas may be considered forward looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially.
For more information please refer to the risk factors discussed in our most recent form 10-Q filed with the SEC.
Additional information will also be set forth in our upcoming form 10-K filing for the year ended December 31 2020.
During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at ABC Dot Xyz Slash investor.
And now I'll turn the call over to Sundar.
Thank you Jim and good afternoon, everyone.
'twenty 'twenty was a year unlike any other.
We are proud that people continue to choose Google products to stay informed connected and comforted during uncertain times being.
Being helpful to people and moments big and small as the foundation of everything we do.
The past year also accelerated the shift to cloud and adoption of online services.
This has profound implications for all companies and consumers.
And we are pleased that so many trust us to help them make this transition.
In particular google's products in support of being a lifeline for millions of small and medium businesses hit hard by the pandemic.
Today I'll review some of the important work we have done this quarter across Google and alphabet with a particular focus on our growing cloud business, which we are breaking out as a separate segment for the first time.
Then I'll welcome to the called Google Chief Business Officer, Philipp Schindler, who many of you know from investor conferences and events.
Philip will speak about partnerships business and advertising trends into Google services segment.
You've heard you'd appreciate more texture and detail there.
Rich will go through the quarter in more detail.
First some highlights at Google.
Since the pandemic began our teams have built new features and products to help people and businesses.
Now we are helping with a complex challenge of getting vaccines to billions of people around the world.
Vaccination locations have started to rollout in Google search and maps.
Google clouds intelligent vaccine impact platform is helping authorities improved vaccine distribution and forecasting.
We are providing substantial new AD grants to the CDC the world Health organization and others to promote vaccine education.
We're also making direct grants to organizations addressing ratio than geographic disparity in vaccination axes.
Opening up Google facilities S vaccination clinics as needed.
Elsewhere in maps, we added a new community feed in the explore tab and now you can track takeout and delivery orders when you book car order from Google maps.
At Youtube via building products to help creators benefit from two important trends.
Live video and short form media.
More than half a million channels life streamed on Youtube for the first time in 2020 from artists performing in their living rooms to churches moving their services online.
And videos and our new shots player are receiving three and a half million daily views, we're looking forward to expanding shots to more countries. This year.
Philip will dive into the work to support online commerce and our partners.
But I want to call out our new showcase product.
Billion dollar investment in partnerships with news publishers and I'm really excited about our progress here.
We have now signed agreements with nearly 450 publications the majority of which are local and regional.
Across a dozen countries, including France, Germany, U K and Brazil.
And last month, we announced a new global deal with Reuters as well as an agreement with one of the major French publishing associations to open access to new showcase.
If you wanted to do more partnerships and more countries and we'll have more to announce in the weeks to come.
Among other highlights.
<unk> launched our re imagine Google pay app, making it easier to organise finances, and save money. It's now used by over 150 million people in 30 countries.
In hardware, we recently closed our acquisition of Fitbit, which will improve our product pipeline and helped make health and wellness accessible to more people.
To all of the Fitbit employees welcome to Google.
<unk> portfolio of products and I look forward to sharing more about our product lines.
Now a closer look at Google cloud.
I'm very pleased with the progress here and as Russell mentioned, we will continue making disciplined investments to scale the business and improve profitability.
<unk> cloud delivered revenue growth of 47% year over year.
With G C P growth remaining meaningfully above the growth rate for cloud overall.
In addition, our backlog grew to nearly $30 billion up from $19 billion in Q3, nearly all attributable to cloud.
We continue to invest strongly in the business given the momentum we are seeing.
These investments in our go to market organization have helped us win larger deals, including several billion dollar deals in 2020.
Dale Fuller $250 million more than tripled in the same period.
We are also seeing strong growth through our broad network of partners with our channel partner ecosystem growing more than five times, an indirect channel revenue more than doubling in the past two years.
Our industry, leading customer satisfaction as identified in a recent report from IDC is helping us drive significant expansion and net revenue retention of existing customers.
Our products are mature and highly differentiated in many segments.
In infrastructure cloud our leadership in multi cloud and cyber security helped us win large data center and it transformation deals with customers like Highmark health and Vodafone as well as cloud native leaders, including base here and that's it.
Our leading data and analytics cloud provides new customers such as Kyoto University graduate school of Medicine, and health care and Mercado Libre in retail with the ability to analyze any data in real time across any cloud.
Our industry solutions based on our AI ml expertise have helped us win customers like Optus and communications and auto group and retail.
Most are particularly excited to see as many large transformations by bringing the entire breadth of google's technology to customers.
Yesterday, we announced a multiyear partnership with Ford, which is using Google cloud Android and other Google apps and services to transform their business.
Google Workspace, the industry's only cloud native communication and collaboration solution is helping companies meet their evolving hybrid workplace needs.
Workspace is driving innovation many of the fastest growing companies.
Additionally, this quarter, we expanded our partnership with SAP.
They'll extend their usage of Google cloud for their cloud solutions, including Asap business technology platform to provide the best experience for our joint customers.
Across alphabet portfolio, our investments in AI continue to drive progress.
For example, deep mines, a I pod protein folding breakthrough will enable researchers to tackle new and difficult problems from fighting diseases to environmental sustainability.
Google partnership with Mayo clinic, and developing AI systems that can health plan radiotherapy treatment.
Raimo is now providing hundreds of fully autonomous rights per week, and recently partnered with Daimler trucks to develop fully autonomous trucks.
To wrap up last year I talked about our four big themes of Helpfulness trust execution and sustainable value.
This will continue to guide our strategic focus across the company in 2021 and beyond.
As we continue to advance our core information mission and products like search maps and Youtube.
People's information safe and secure.
Drive substantial advancements in AI or the next three years and.
And to ensure the most effective place to work beyond Covid, all supported by sustainable long term businesses.
I want to thank our teams across Google and alphabet for all of their work this quarter and throughout all of 2020.
2021 gives us another chance to be helpful to people businesses and communities. While there's hard work ahead I'm profoundly optimistic about what we'll accomplish together with.
With that I'll turn it over to Felipe.
Thanks, Sundar and good afternoon, everyone, it's great to be joining you today.
We're pleased with Google services revenue of $52 9 billion in the fourth quarter, which continued the significant rebound from the negative impact of Covid earlier in the year.
Two trends drove the strong results across search Youtube and network advertising consumers.
To move more of their activity online and advertisers have responded to this shift in consumer behavior by reactivating spend that they had passed earlier in the crisis.
In the fourth quarter retail was the largest contributor to the year on year growth of our ads business.
Media and entertainment and CPG were also strong contributors there.
The trajectory of search advertising over the past year demonstrates its responsiveness to consumer interest and needs and help marketers can quickly adjust their spending as circumstances change to focus on generating ROI for their businesses and.
In Youtube direct response had a substantial year on year growth throughout the entire year, including the fourth quarter.
After a substantial pullback at the outset of the pandemic brand spending began to recover in the third quarter.
The market has realized that even if there was a pullback in consumer demand in the short term they needed to keep their brands in front of people to stay top of mind when spending picked back up.
In the fourth quarter, we saw significant acceleration of brand spending on Youtube.
Network revenues in the fourth quarter benefited from the same uplift in spend by advertisers, particularly admob and AD manager.
Other revenues were driven by growth in Youtube non advertising revenues, primarily from subscriptions as well as by Google play revenue growth.
I now want to step back from the results of the quarter and quickly reflect on the generational shift to digital that we've seen over the past year and what that means for our business.
First dramatic changes to consumer behavior has fundamentally changed the way companies are doing business across many industries and geographies.
<unk> tons off or in German Lufthansa is a great example, like many airlines that he just more insight on where to fly at what capacity and how often that's travel started to open up last year.
Over the summer, we built a product called flight demand explorer, which gave for real time answers to these questions, helping them find demand and ramp up within two months, they triple destination routes and got more than 80 planes back into gear with many flights fully sold out within days.
We're putting a real time insights into the hands of businesses in the other verticals.
We just launched a new insights pitch to give our advertisers the latest an ever changing search trends relevant to their business right inside of Google apps.
Petco. It was another Great example, as people have adopted an unprecedented number of pets during shelter in place. It led to a spike in demand for pet supplies and petco saw their curbside pick up services go through the roof.
So the accelerated delivery and pickup options using search shopping and local inventory ads.
Able to drive 100% increase in their E commerce business.
And this is important multi touch points like curbside pick up and pick up in store are in high demand and here to stay we've seen huge year on year jumps in searches for available near me and curbside pickup retailers offering multi touch are benefiting from this trend and this offering fits squarely in our core capabilities with maps and search Larry.
To tell you about l'oreal they did it.
Shop adapting to changes in shopping behavior by making a sharp pivot to E Commerce Center to review by.
By making existing video creators more timely and actionable there Q U S brand drove record visits to their side from Youtube for X more per dollar.
There also are partnering with us to bring a our experience for the cosmetics across Google surfaces, including Youtube and search.
I could go on and on companies are rapidly adopting.
Next I'd like to talk about how we're evolving our commerce strategy, we've taken significant steps to accelerate an open ecosystem for non retail that benefits businesses of all sizes from large online household names to your neighborhood storage just around the corner.
We've long said that we want to make Google the best place for you guys to start their shopping journey, regardless of where those journeys and.
In the fourth quarter the year over year growth rates in retail searches was more than three times. The rate we had seen in the same period last year driven in part by Covid.
We also want to make it with the best place for merchants to connect with users regardless of whether the transaction happens on our platform or theirs.
For the last 12 months pre Google merchant community over 80% with significant growth in small and medium sized businesses.
All of these merchants and their inventory it will show up across Google, including search image search and Youtube.
I want to close by talking about something that has been a principal of Google since our founding.
We've always believed that the future of Google and the future of our partners are fundamentally linked in fact, we built our business on a revenue share models that support a broad range of partners, including large and small online publishers individuals' Youtube creators broadcasting from their homes and global music labels as well as Google play developers of all sizes.
Only succeed when our customers and partners succeed one number I think its worthwhile highlighting in this context over the past three years, we paid out nearly $140 billion to our partners from Google play developers and publisher partners using our advertising services to Youtube creators artists and media organizations around the world.
Our performance is only possible because of our customers and partners I want to thank them for their partnership collaboration and feedback I also want to thank our product partnership seals and many support teams for their tremendous work innovating to help our users customers and partners succeed, especially through these difficult times.
And I'll hand off the call to Ruth.
Thank you Philip we are very pleased with our exceptional fourth quarter performance. After an unprecedented year for 2020 total alphabet revenues were 183 billion up 13% year on year or up 14% in constant currency with our new segment disclosures this quarter I'll start with quarterly results at the alphabet level.
Followed by segment results and conclude with our outlook my focus will be on year on year comparisons for the fourth quarter unless I state otherwise.
For the fourth quarter, our consolidated revenues were $56 9 billion up 23%, which reflect broad based increases in advertiser spending and search and Youtube and Google services as well as ongoing strength in Google Cloud. Our total cost of revenues was $26 1 billion up 24.
That's primarily driven by other cost of revenues, which was one which was $15 6 billion and up 25%.
The biggest factors here or first content acquisition costs, primarily driven by costs for Youtube advertising supported content.
Followed by cost for subscription content.
And second costs associated with data centers and other operations, including depreciation.
Operating expenses were $15 2 billion down 4%.
The year on year decline reflects the lapping valuation based compensation charges in certain other bets in the fourth quarter of 2019, primarily in R&D as well as the impact of actions taken earlier in the year as a result of Covid.
Each of the three components of Opex also reflects our decision to slow headcount growth beginning late in the first quarter.
Head Count was up 3180 from the third quarter again, the majority of new hires were engineers and product managers with continued aggressive investment in cloud for both technical and sales Ross.
Operating income was $15 7 billion up 69% and our operating margin in the quarter was 28%.
Other income and expense was 3 billion, which primarily reflects unrealized gains in the value of investments and equity securities.
Net income was $15 2 billion operating cash flow was $22 7 billion with free cash flow of $17 2 billion in the quarter and 43 billion for the full year 2020, we ended the fourth quarter with 137 billion in cash and marketable securities.
Let me now turn to our segment financial results, starting with our Google Services segment total Google services revenues were $52 9 billion up 22% each component of our advertising revenues reflects the return of advertiser spend in response to the continued movement of consumer activity online.
Philipp spoke about including Google search and other advertising revenues of $31 9 billion in the quarter up 17% Youtube advertising revenues of $6 9 billion up 46% driven by a rebound not only in brand advertising, but also ongoing strength in direct response.
<unk> advertising revenues of $7 4 billion up 23%.
Other revenues were $6 7 billion up 27%, primarily driven by growth in Youtube non advertising and play revenues.
Within play App revenues in the fourth quarter continued to benefit from elevated levels of engagement, reflecting increases in active buyers and spend per buyer due to COVID-19. However, we did experience a deceleration in growth from the levels, we saw in the third quarter.
Google Services operating income was $19 1 billion up 41% and the operating margin was 36%.
Turning to the Google Cloud segment, including G. C P and Google Workspace revenues were $3 8 billion for the fourth quarter up 47% G.
G C PS revenue growth rate once again meaningfully above cloud overall.
Strong growth in Google Workspace revenues was driven by growth in both seats and average revenue per seat Google.
Google Cloud had an operating loss of $1 2 billion essentially flat versus last year.
As to our other bets for the full year 2020 revenues were 657 million, primarily generated by fiber and verily and reflect that most of our other bets are pre revenue.
The operating loss was $4 5 billion for the full year 2020 versus an operating loss of $4 8 billion in 2019.
Let me end with our outlet for each segment and our investments more broadly.
For Google services, we're encouraged by the increase in consumer online activity and the return of advertiser spend as Ross.
Afflicted in our Q4 results looking forward to 2021 year over year quarterly comparisons will be affected meaningfully by the impact of Covid last year with easier comps in the first half, especially in Q2, and then lapping stronger performance in the second half with respect to other revenue.
With the closing of the Fitbit acquisition earlier this month, we will be reporting its revenues within Google other.
In terms of investment levels within Google services late in the first quarter of 'twenty 'twenty as a result of Covid. We made what we described as tactical adjustments to slow the pace of spend in certain categories.
Given the ongoing uncertainty in the external environment, we maintained the discipline through the rest of 2020.
Looking forward, we do expect the pace of investment to increase to support the extraordinary opportunities, we see given the usefulness of our products and services in this environment.
The investment pace will ramp up over the course of the year.
As for Google Cloud, we've obviously been investing aggressively given the substantial market opportunity we see.
Under Thomas Kurian leadership, we further accelerated investment to strengthen the position of the business. For example, we are on track to meet our near term goal of tripling the size of the cloud direct sales force and have greatly expanded the partner channel. We've also substantially improved our product offering will rationalize.
Our approach to focus on our six key industry verticals.
And we've invested in expanding our network of locations for compute capacity to support cloud ending 'twenty 'twenty, serving customers in 24 regions and 73 zones.
We're encouraged by the momentum in the growth of revenue and customer wins, we more than doubled revenues over the last two years from $5 8 billion in 2018 to $13 1 billion in 2020.
Our backlog, which is nearly all attributable to cloud nearly tripled from 2019 to 2020, although increases in backlog do not directly correlate to revenue trends the growth in backlog demonstrates the success, Google cloud is having with large enterprises, which are signing meaningful long term commitment agreements.
<unk>.
Looking forward, we will continue to focus on revenue growth driven by ongoing investment in products and the go to market organization.
<unk> operating loss reflects that we have meaningfully built out our organization ahead of revenues.
We've discussed in prior quarters with respect to the substantial investments in our go to market organization as well as engineering and technical infrastructure.
Operating loss and operating margin will benefit from increased scale over time. In addition, we are focused on delivering on efficiency efforts across the board to contribute incrementally to profitability overtime.
Finally, as you can see from the historical data provided in the press release clouds operating loss was higher in the first quarter relevant relative to other quarters and then the operating loss improved thereafter, we expect similar seasonality in 2021.
In terms of other bets, we continue to invest with a focus on the long term value creation opportunity.
On head count we plan to Reaccelerate the pace of hiring in Google services in line with our opportunities our head count growth will also reflect the addition of fitbit and our ongoing transition of certain customer support roles from third party vendors to Google in House Operation centers. We also plan to continue to prioritize investment in both.
Sales and technical roles for Google Cloud.
Turning to Capex at the consolidated level the year on year results. This quarter again reflect a slower pace throughout 2020 of investments in office facilities within technical infrastructure servers continued to be the largest driver of investment in the fourth quarter, followed by data centers. Looking ahead, we expect a return to a more normalized.
Pace of ground up construction and fit out of office facilities, which translates into a sizable increase in capex in 'twenty and 'twenty one.
Servers will continue to be the largest driver of spend on technical infrastructure.
Finally, a housekeeping point as noted in our earnings press release, we have adjusted the estimated useful lives of surfers in certain network equipment. Starting in 2021, we expect these changes will favorably impact our 2021 operating results by approximately $2 1 billion for assets as of year end 2012.
We look forward to the year ahead hope everyone stays safe. Thank you and now Sundar, Philip and I will take your questions.
Thank you.
Quick question, you will need to pop Star then one on your Touchtone telephone to withdraw your question. Please press the pound key.
Background noise can you. Please mute your line once your question has been stated.
Well My first question comes from Eric Sheridan from UBS. Your line is open.
Thank you so much for taking my question and I hope, everyone is safe and well and the team up there as well maybe I'll try first on cloud I don't know, if it's better to sundar or Ruth but could you just conceptually help us understand how to think about the opportunity you're scaling after versus cloud and how much factors back into what you want to invest against the.
Opportunity or possibly maybe even accelerate the opportunity by looking at inorganic paths to growing scale vis vis the competition in this space and then maybe for Philipp if I can your Youtube continues to evolve as a platform. There's no subscription offerings you highlighted the strength you're seeing in T. R. Could you talk a little bit about the path for monetization.
In the coming years, and how we should think about the opportunity against your large scaled audience gauge, but you see it Youtube broadly. Thank you so much.
You know in cloud.
You know obviously, we see a we see how early customers that are in the shift.
We see the large Tam a head end and definitely the market dynamics and our momentum in the context of the market.
What are what is the framework with which we are thinking about the scale of investments and the pace of investments.
Obviously, it's an area in which are you.
The longer you are in the cohorts that up and so you know contributes more in the economies of scale starts working as well but.
But we are definitely investing ahead to make making sure we are able to serve our customers.
Globally across all of the offerings. They are interested in and that's how we're thinking about it.
I'm.
I'm not sure you want to add more I think that's the main point just given the sheer scale of the opportunity and our position.
The thing to really position ourselves, while across industries and geographies and the key elements of it I tried to call out in the opening comments investing in product go to market data centers and you can see it in the results. I think you are going to continue to see US a building there and that's you know what we're talking about building ahead, we are keenly.
On delivering for both customers and shareholders and that of course includes an intense focus on the path to profitability.
Yes, and on your question on Youtube on overall development and the subscription side.
Our direct response business on Youtube was practically nonexistent three years ago and now it's one of our largest and fastest growing AD offerings on Youtube.
It was truly a fraction where actually make it easier for advertisers to unlock opportunities to reach audiences with video campaigns and just to give you a few numbers 60 per cent of true refraction customers on Youtube Youtube and we more than doubled the number of active advertisers using true reaction in the first six months of 2020.
They're really tapping into the tremendous need commercial behavior on the platform, 70% of Youtube viewers are seeing they bought a brand as a result of seeing it on Youtube talked about l'oreal earlier.
Mr Class is another Great example, online learning has become a huge opportunity and they used to be for actually connect the right people the right content and saw really big like 140% increase in clicks to their sites, 70% increase in sign ups to courses and so on.
Youtube continues and our review to be amazing for brand advertisers as well our brand business was hit hard in the early stages of the pandemic rebounded in Q3 and into Q4 and it really helps advertisers to reach younger audiences. They can't reach anywhere we know of.
Reach more 18 to 49 year olds in all linear television networks combined.
What's the time is increasing our advertising effectiveness is getting better and better.
So this is this is very very very nice development on the subscription strategy. Maybe just briefly music is an incredibly popular vertical in Youtube and obviously, a key part of our.
Overall experience, we found that users wanted a premium Youtube experience and we.
Basically the ability to download songs and videos Youtube freemium provides additional revenue streams of course, your music labels and publishers as well in 2019 Youtube paid the music industry over 3 billion, we have over 30 million music and premium paid subscribers.
We are now operating over 95 countries. So members get a lot of extra benefits yeah.
Yeah.
Thank you.
And our next question comes from John from J P. Morgan.
Okay.
Great. Thanks for taking my questions Ruth and Sundar I just wanted to follow up on Eric's question a bit.
So you can add just in terms of the significant inflection that you saw on Google cloud backlog, there and I guess in particular curious what youre seeing in terms of benefit and successes, you're leveraging alphabet more broadly like in the Ford deal.
And then how do you think about Google cloud margin structurally kind of long term relative to peers any color there would be helpful. Thanks.
So maybe I'll.
Let's start with the <unk>.
Customers are looking for a digital transformation and depending on the sector. They are in they are definitely interested in.
A broader solution set across the breadth of what Google and alphabet can bring.
You see this in health care, our efforts in Google Health.
Work, that's happening in virtually all end up helping.
Florida is a great example of a stay of.
Thinking longer term.
Not just for cloud, but Android auto powering their vehicles are you know and so these are big big transformations cutting across the company.
And one of the areas, where we're really executing a is the leveraging our global business operations that Philipp runs and partnering closely with Thomas' teams and our you know that's that's definitely brings in a lot of synergies here.
On your second question on the on the broadest stuff. The one thing I would say is and I mentioned the part earlier you know you know but.
We get into these long long term deals and so over time, you know as you add more cohorts that contributes to.
To the margin structure.
It is.
The scale of the product offerings are the <unk>.
Number of our areas and the number of regions in the world.
You know there is a much more significant investment and and so that is definitely a fixed cost structure associated with it and and we're also investing ahead, but as we scale up the business.
We expect that tends to be a favorable.
Yeah.
Thank you.
Thank you and our next question comes.
From Jefferies. Your line is now open.
Good afternoon, Yeah, you mentioned you accelerated saw accelerating brand spend in the quarter and many investors are asking the sustainability and what youre seeing.
And that as you head into the beginning of this year. If you could just talk directionally in terms of how your clients are acting as if they had out of the holiday season, all that'd be helpful. Thank you sure I'll take that.
As we've noted the financial results really did reflect this increase in advertiser activity that was in part unlocking budgets that they had paused earlier in the year as well as really reflecting the increase in consumer online activity.
The largest contributor as Philipp mentioned was a retail the largest contributor to year on year growth of the ads business that I would say tech media and entertainment as well as CPG were also meaningful contributors and for search we saw ongoing improvement in advertiser sprint spend Bradley Bradley.
For you to direct responsive Philip talked about really did maintain a very high level of growth and the acceleration in overall Youtube revenue growth reflects the pick up and brand advertising across all verticals on top of the ongoing strength.
That we saw in Dr. And then in network also same point. It's you know this pickup in advertiser spend Philipp noted it was led by growth in Admob and AD manager. So we are really pleased with Q4. It was a great end to a challenging year and when we think about 'twenty 'twenty one I made the point in the opening call.
So obviously you have easier year on year comparisons in the first half asleep you know anniversary the effects of the pandemic. So you know there's not much more to add we it was a strong quarter and we feel really good about the level of activity.
Thanks Ross.
And then Oh.
He comes from Heath Terry from Goldman Sachs. Your line is open.
Great. Thank you very much appreciate the level of detail on the drivers behind the acceleration in search and Youtube I was wondering if you could go a bit further and disaggregate or even just qualitatively the drivers.
Behind that acceleration between pre pandemic advertisers returning to prior spending levels versus new advertisers are new advertiser spend being being allocated to the to the platform.
Well I think the main point is sort of this mega comment that we saw a slowdown in its all upset and we've talked about on prior calls you know one of the first things that happens as a step back and then you see a caesars reengage and activity picks up and the effectiveness of.
Advertising Roy available you see advertising come back and I remember talking about this throughout last year that we had seen is actually going back to the prior financial crisis and what you've seen is just a broad based reengagement, which were where we're really points about across you know across industries.
And it's also as Phil noted in his comments, there's been a tremendous opportunity really to step in here and help small medium businesses as they were evolving and adapting to this new digital world and it's been quite key there as well.
Great. Thank you very much.
Thank you next question comes from bringing my walk from Morgan Stanley.
Yeah.
Thanks for taking my questions I have two for Philip So first one I appreciate all the color on on retail and commerce. The merchant community growing so strong last year I'd be curious to hear about your your discussions now with with merchants and sort of what the the largest friction points that they're looking for for you to solve and sort of you.
To help them as a as the world reopens the merchants discussions and then secondly.
A question on one of the earlier products on discover feed loved to hear about sort of early learnings on discover feed and how you think about hurdles need to overcome to monetize that.
Yes. Thank you. Thank you very much for the question look at the highest level, we want to build a healthier E commerce ecosystem when people come to Google to shop, we want them to help fund the best products at the best prices from really the widest range of merchants and we want our results to be as comprehensive as relevant as possible.
And we took some significant steps last year as you know on Google shopping and in many ways. We really see them has returned to a first principles here.
Free listings Europe conventions really good feedback helps a little up areas for them in retail.
So we've become a great place for stores to connect with potential customers and whether it's by driving traffic to the websites for free listings or ads or just by making it easier for purchases happen directly on Google and by the way let me be clear also shopping ads will continue to be a powerful way.
For retailers to promote their products obviously.
So overall, we're providing an open ecosystem that works for every kind of business from national chains and online marketplaces to just your small local stores.
We're giving retailers more choice, which is very well received by opening our platform to third party providers, we talked about this starting with Paypal and Shopify and we brought Youtube into the fold and we've begun experimenting with a feature that lets you learn a lot more about product and videos on a limited set of channels and so on and so on so I would say overall, it's a it's very.
Very well received.
Uh huh.
On the discovery side.
Discovery has grown so discovers discover and obviously a discovery. So discover has grown dramatically since we launched it I think it just three years ago.
People are loving home, we're surfacing relevant information gorgeous visuals. So all in will be called Parulis shooter experience.
And naturally some of these experience are commercial and we made discovery ads generally available about six months ago. I think it was may 2020, and it's already reaching up to 3 billion people across discover Youtube Gmail and that's worldwide.
And advertisers love, how we're able to drive performance objectives by really matching their premium creatives with Google intent on our what we call curious surfaces.
Yeah.
Great. Thanks.
Thank you and the next question comes from Colin Sebastian from Baird. Your line is now.
Oh, great. Thank you very much good afternoon.
Maybe for Sundar or fill up a follow up on Youtube.
Just given the strength of those services subscriptions during the pandemic.
I Wonder if part of what we're seeing is more of an acceleration from from TV AD budgets from linear spending two to more of a Youtube spending I mean, given also the momentum we've seen in over the top over the last the last nine months or so and then given some of the changing industry dynamics around privacy and <unk>.
What you've already announced around browser cookies wondering what plans might be as well for Android and how we should think about the potential impact on AD revenues broadly as a result of privacy changes. Thank you.
Yeah, I can I can take that we've seen Brent steadily shift budgets to Youtube to complement their linear TV buys as television audiences really become more fragmented and its traditional TV ratings continue to decline TV advertiser turning to streaming platforms like Youtube to reach people, who are no longer watching T V.
Connected Tvs are our fastest growing screen in the U S. We have over 100 million people that watch Youtube Youtube TV on their T V screens each month.
Youtube helps advertisers regional audiences, they can't reach anywhere else and we talked about at Youtube reaches more 18 to 49 year olds in all linear T. T V networks combined.
And so there is an opportunity a big opportunity for you to to help brands and agencies really more easily connect with this audience and we're very invested in this space.
And just to give you a few examples in the second half of last year, we launched Youtube muster on television screens to help advertisers to drive awareness with large audiences in basically a single moment. Many are taking advantage of it Uber and many others.
Launch brand lift for Ya Chu longevity screams screens to really help advertisers make informed decisions about AD performance optimize streaming campaigns in real time, and so on and we also made it possible last year for advertisers to basically buy among the most popular Youtube Youtube TV content viewed on the T V screens and one would be call. It one single lineup.
Quickly on the third party Cookie strategy in general we know that expectations are really changing for how data is used online.
And people are demanding greater privacy, we're taking our responsibility at your user privacy and to supporting our partners in the ecosystem very very seriously.
In 2019, we announced the privacy sandbox, which is an open standards initiative to invent new technology that will replace a third party cookies with a set of privacy preserving mechanisms for the weapons were making great progress.
Sure. It detailed proposal with the industry for experimentation and feedback we shared recently is what our what we call floor, our Federated learning of cohorts API.
Which we think provides an effective replacement single for third party cookies, and we really believe privacy sandbox is the best path forward and we remain very committed to our collaborations with the ads community on privacy preserving open standard mechanisms that can what we call sustain a healthy in AD supported web.
Okay. Thanks for that.
Yeah.
Thank you and our next.
John comes from Michael Kim from <unk>.
Yeah like World.
Thanks, John Sleep I was following up on Collyns question just perfectly.
I wanted to understand a framework if you could just think about the bigger opportunity longer term.
They are already high praise and streaming video right. So you're happy with the progress of the Youtube TV, So far where you expand into other countries and he could contrast that versus the opportunity you see.
T V and devices that you've done for Google TV Chromecast, and then is there a proceed adding value from advertisers for this type of inventory you know does it attract a new type of advertisement to offer Youtube inventory or Nick.
T V inventory.
From a traditional Youtube advertising.
Jim.
Maybe I'll comment on our you know one of the things that are just book both for Google over the years as you know, we really tried to reach users where they are.
That's how Google is work always even Mr. That you know cross platforms across devices across countries and I think the same applies for the Youtube experience, we want to bring it to the screen that's most convenient for users and.
Hence our investment in Google TV Chromecast.
Youtube TV as a whole a whole itself.
And I think we are taking.
A long term view here, obviously focused on the user experience and a really really getting it all to work well.
We know why the smartphone side of the center for Youtube Tvs, an important form factor and over time people will use it across multiple screens and so that's the experience. We are focused on and anytime we create that experience. We know overtime there is value to be captured commercially.
John being transcribed sizes, but we take a long term view.
Yes, I talked about.
Yes, and I talked about the connected TV part already maybe briefly just on Youtube TV Youtube TV continues to gain momentum or advertising efforts on Youtube T. V itself is still very very early.
But we think theres an opportunity to apply some of our targeting and measurement capabilities to really provide a better user and advertiser experience over time and yeah. We heard from our customers. They have a very strong interest in advertising and streaming environments. I mentioned, how we combine it into single lineups are so so that's an interesting path going forward.
Thank you.
Our next question comes from Steven Schwartz.
Your line is now open.
Yeah.
Okay. Thank you so much so sundar I think let's I think you've recently talked about a 10 to 20 year journey for AI and quantum computing to unlock new use cases, I think you've brought up in the past some of the ways AI is helping you with the blocks that you have in market right now but.
So you take a more longer term look into the future or what do you think some of the new applications could.
Could be.
Fill up it might've been in a few years ago. When you were speaking at an Investor Conference and you called out the desire to onboard and help smbs, particularly as they really had no way to advertise before and Google and online in general presented a golden opportunity to really help them grow their business. So where do you think you are.
In terms of you know putting together an easy to use set of tools to help those who otherwise don't really have agency representation.
You know so that they can reach all the different customers that they should be reaching across all of that for services that you're offering. Thanks.
Thanks, Steve for now and today I parse apart first.
You know, we've always wanted to be a foundational in how we approach.
Technological advances and that's that's the core competency being missed in across the company I mean.
One of the largest R&D enlist is in the world and obviously AI AI is a big part of it.
Just you know I'm really excited that our you know we over the past few years, while we have made progress in you know understanding different modalities be it a text images.
No worries vision et cetera. There is we definitely you know I think we hit an inflection point and are you now and we are investing too.
Better models and deepen our understanding and do it in a more generalized way and when we do that it'll apply horizontally across our products.
You saw version of that when we ship, but in search and was one of our biggest quality improvements.
But you'll see that flow across Google search Youtube.
Android as well as our investments in now so that would be at a self driving cars are a robotics. So we you know we take that view and definitely want to make sure. We are driving state of the art promise Philipp.
Yes. So first let me recognize I mean, it has obviously been a very very challenging environment for smbs. Many weren't online many last line of sight to demand overnight due to COVID-19.
So around this time last year as soon as we saw the scale of the impact we really accelerated product that give our customers and especially our SMB customers signals to help them actually navigate and.
Pivoted and as I noted earlier as more consumers moved online and advertisers. Obviously you've responded by reactivating spend we also saw our advertiser base grow, particularly the number of smaller advertisers.
Advertisers are smbs, and we're helping them see shifts in supply and demand not just across sectors, but actually within sectors.
For example, travel continues to get hit hard hit pretty hard and after the initial lockdown last year.
As for vacation homes, and Jim you rentals, so huge spikes that continues to fluctuate.
On the other hand look at our retail demand isn't disappearing. It's shifting in many cases, we're seeing increases in searches for things like Jim equipment Crafts Ah patient heaters.
And so and anything related to outdoor activity and so on we're.
We are obviously thinking about how to help smbs them products like maps like over the last five years, we've made more than a thousand improvements to business profiles are making it a lot easier for merchants to connect with customers and especially now in the crisis and in 2020. We added new features to for example provide COVID-19 updates our service.
<unk> and <unk> attributes like take out delivery curbside pickup and they'll all easily available for consumers.
On maps to connect them to their favorite Smbs, So really incredible investment frankly from our side and I think it's very well received.
Ross.
Okay great.
My question in English.
This will accomplish that goal they can compete with any closing remark.
Thanks, everyone for joining us today, we look forward to speaking with you again on our first quarter 2021 call. Thank you and have a good evening.
This concludes today's conference call.
You may now disconnect.
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