Q4 2020 Alphabet Inc Earnings Call
[music].
Welcome everyone and thank you for standing by for the alphabet fourth quarter 2020 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation and will be a question and answer session to ask a question during the session and you will need to press star one on your Touchtone telephone if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your Speaker today, Jim Friedland director of Investor Relations.
Go ahead.
Thank you good afternoon, everyone and welcome to the alphabet fourth quarter 2020 earnings conference call with US today are Sundar Pichai Philipp Schindler and Ruth per at now 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 and 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 a B C Dot X Y Z slash investor and now.
I'll turn the call over to Sundar.
Thank you Jim and good afternoon, everyone.
'twenty and 'twenty was a year unlike any other.
We are proud that people continue to choose google's products to stay informed connected and comfort during uncertain times being.
Being helpful to people and moments big and small and it's the foundation of everything we do.
The past here 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 and support have been 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 caller, who was the Chief business Officer, Philipp Schindler, who many of you know from investor conferences and events.
Philip will speak about partnerships business and advertising trends and the Google services segment.
You've heard you'd appreciate more texture and detail there.
And Ruth will go through the quarter and more detail.
First some highlights at Google.
Since the pandemic began our teams have built new features and products to help people and businesses.
We are helping with the complex challenge of getting vaccines to billions of people around the world.
Vaccination locations have started to rollout and Google search and maps.
Google Cloud intelligent and vaccine impact platform is helping authorities improve vaccine distribution and forecasting.
We are providing substantial new AD grants to the CDC the world Health organization, and others to promote vaccine and education.
We're also making direct grants to organizations addressing racial and geographic disparities and vaccination axes.
Opening up Google specialties, and vaccination clinics up as needed.
Elsewhere and maps, we added a new community feed and the explore tab and now you can track takeout and delivery orders when you book, Colorado from Google maps.
At Youtube via building products to help creators and benefit from two important trends.
Live video and short form video.
More than half a million channels life streamed on Youtube for the first time in 'twenty and 'twenty.
From artists performing and their living rooms to churches moving their services online.
And videos and our new shots player are receiving three and a half billion 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 investment and 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, UK and Brazil.
And last month, we announced a new global deal with Reuters and so there's an agreement with one of the major French publishing associations to open access to new showcase.
If you want to do more partnerships and more countries and we'll have more to announce in the weeks to come.
Among other highlights.
Launched a re imagined glu pay app, making it easier to organise finances, and save money. It's now used by over 150 million people in 30 countries.
And 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 and 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'll continue making disciplined investments to scale the business and improve profitability.
<unk> cloud delivered revenue growth of 47 per cent year over year.
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 and Q3, nearly all attributable to cloud.
We continue to invest strongly and the business given the momentum we are seeing.
These investments and our go to market organization have helped us and larger deals, including several billion dollar deals in 'twenty and 'twenty.
Deals over $250 million more than tripled and the same per year.
We're also seeing strong growth through our broad network of partners with our channel partner ecosystem growing more than five times and indirect channel revenue more than doubling and 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.
And our products are mature and highly differentiated and many segments.
And infrastructure cloud leadership, and multi cloud and cyber security.
And that's been large data center and it transformation deals with customers like Highmark health and Vodafone as well as cloud native leaders, including base, there 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 and 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 and third breath 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 book Space, the industry's only cloud native communication and collaboration solution is helping companies meet their evolving hybrid workplace needs.
Workspace is driving innovation and 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 and continuing to drive progress.
For example, deep mines AI powered protein folding breakthrough will enable researchers to tackle new and difficult problems from fighting diseases to environmental sustainability.
Google's partnership with Mayo clinic, and developing AI systems that can help 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.
These will continue to guide our strategic focus across the company in 'twenty and 'twenty, one and beyond.
And has to be continued to advance our core information mission and products like search maps and Youtube.
People's information and safe and secure.
Drive substantial advancements in AI or the next three years.
And to ensure the most effective place to work beyond Covid all so.
<unk> 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 'twenty and 'twenty.
2021 gives us a chance to be helpful to people businesses and communities. While there's hard work ahead and profoundly optimistic about what we will accomplish together.
With that I'll turn it over to flow.
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 and the fourth quarter, which continued the significant rebound from the negative impact of Covid earlier and the year.
And two trends drove the strong results across search and Youtube and network advertising.
<unk> continued 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 and the crisis.
And 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.
And 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 and circumstances change to focus on generating ROI for their businesses.
And 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 and the third quarter.
Marketers realized that even if there was a pullback and consumer demand and the short term they needed to keep their brands and front of people to stay top of mind when spending pick back up.
And the fourth quarter, we saw significant acceleration of brand spending on Youtube.
Network revenue was in the fourth quarter benefited from the same uplift and spend by advertisers, particularly and Admob and AD manager.
Other revenues were driven by growth and youtube's 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 and we've seen over the past year and what that means for our business.
First dramatic changes to consumer behavior have fundamentally changed the way companies are doing business across many industries and geographies.
Lufthansa or and German Lufthansa is a great example, like many airlines they needed more insight on where to fly and what capacity and how often is travel and 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 health and can find demand and ramp up within two months at triple destination routes and they've got more than 80 planes back and dear with many flights fully sold out within days.
We're putting a real time insights into the hands of businesses and other verticals and fat.
We just launched and your insights pitch to give our advertisers the latest and ever changing search trends relevant to their business right inside of Google apps.
Pet Coke is another great example, as people adopt it and unprecedented number of pets during shelter in place and led to a spike in demand for pet supplies and petco saw their curbside pickup services go through the roof.
So the accelerated delivery and pickup options using search shopping and local inventory ads and it will.
Able to drive, 100% increase and their ecommerce business.
And this is important multi touch points like curbside pick up and pick up and store are and high demand and here to stay we've seen huge here and your jumps and searches for available near me and curbside pickup retailers offering multi touch are benefiting from this trend and this offerings fits squarely in our core capabilities with maps and search.
And tell you about l'oreal and they did a great job adapting to changes and 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 ex more per dollar.
They 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 and open ecosystem and non retail that benefits businesses of all sizes from large online household names to you and neighborhood store 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.
And the fourth quarter, the year over year growth rates and retail searches and what's more than three times per rate, we had seen and 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, we grew up and merchant community over 80% with significant growth and small and medium sized businesses.
All of these merchants and their inventory and will show up across Google, including search and image search and Youtube.
I want to close by talking about something that has been a principal of Google since our founding.
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 and models that support a broad range of partners, including large and small online publishers individually Youtube creators broadcasting from their homes and global music labels as well as Google play developers of all sizes.
We 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 collaborations and feedback I also want to thank our product partnerships fields and many support teams for their tremendous work.
If anything 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 'twenty and 'twenty total alphabet revenues were 183 billion up 13% year on year or up 14% and constant currency.
And 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.
Focus will be on year on year comparisons for the fourth quarter unless I state otherwise.
The fourth quarter, our consolidated revenues were $56 9 billion up 23 per cent, which reflect broad based increases and advertiser spending and search and Youtube and Google services as well as ongoing strength and Google cloud.
Our total cost of revenue was $26 1 billion up 24%, primarily driven by other cost of revenues, which was one which was $15 6 billion and up 25 per cent.
Biggest factors here or first content acquisition costs, primarily driven by costs per youtube's advertising supported content followed by cost per subscription content.
And second cost 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 and certain other bets and 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 flow head count 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 and definitely in cloud for both technical and sales growth.
Operating income was $15 7 billion up 69 per cent and our operating margin and the quarter was 28 per cent.
Other income and expense was 3 billion, which primarily reflects unrealized gains and the value of investments and equity securities and net income was $15 2 billion operating cash flow was $22 7 billion with free cash flow of $17 2 billion and the quarter and 43 billion for the full year two.
<unk> thousand 20, we ended the fourth quarter with 137 billion and 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 per cent each component of our advertising revenue reflects the return of advertiser spend and response to the continued movement of consumer activity online.
Phil spoke about including Google search and other advertising revenues of $31 9 billion and 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 and direct response.
Network advertising revenues of $7 4 billion up 23 per cent.
Other revenues were $6 7 billion up 27%, primarily driven by growth and Youtube non advertising and play revenue.
Within play App revenues and the fourth quarter continued to benefit from elevated levels of engagement, reflecting increases and 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 per cent and the operating margin was 36 per cent.
Turning to the Google Cloud segment, including G. C P and Google Workspace revenues were $3 8 billion for the fourth quarter up 47 per cent G.
G C PS revenue growth rate once again meaningfully above cloud overall.
Strong growth and Google Workspace revenue was driven by growth and both seats and average revenue per seat Google.
Google Cloud and had an operating loss of $1 2 billion essentially flat versus last year.
As to our other bets for the full year 'twenty and 'twenty 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 and 2019.
Let me and with our outlet for each segment and our investments more broadly.
For Google services, we're encouraged by the increase and consumer online activity and the return of advertiser spend as reflected in our Q4 results looking forward to 'twenty 'twenty, one year over year quarterly comparisons will be affected meaningfully by the impact of Covid last year with easier comps.
And the first half, especially in Q2, and then lapping stronger performance and the second half with respect to other revenues 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 and 'twenty as a result of Covid. We made what we described as tactical adjustments to slow the pace of spend and certain categories.
Given the ongoing uncertainty and 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.
And are Thomas current 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 and we've also substantially improved our product offering will rationalize.
Our approach to focus on our six key industry verticals.
And we've invested and expanding our network of locations for compute capacity to support cloud ending 'twenty 'twenty, serving customers and 24 regions and 73 zones.
We're encouraged by the momentum and the growth of revenue and customer wins, we more than doubled revenues over the last two years from $5 8 billion and 2018 to $13 1 billion and 'twenty and 'twenty.
Our backlog, which is nearly all attributable to cloud nearly tripled from 2019 to 2020, although increases and backlog do not directly correlate to revenue trends the growth and backlog demonstrates the success Google cloud is having with large enterprises, which are signing meaningful long term commitment agreement.
<unk>.
Looking forward, we will continue to focus on revenue growth driven by ongoing investment and products and the go to market organization.
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 and 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 relative it relative to other quarters and then the operating loss improved thereafter, we expect similar seasonality in 'twenty and 'twenty one.
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 and 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's in house operation centers. We also plan to continue to prioritize investment and 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 investment and office facilities within technical infrastructure servers continued to be the largest driver of investment and 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 and certain network equipment, starting in 'twenty and 'twenty. One we expect these changes will favorably impact our 'twenty 'twenty one operating results by approximately $2 1 billion for assets as of year end 2012.
We look forward to the year ahead, and hope everyone stays safe. Thank you and now Sundar, Philip and I will take your questions.
Thank you.
And I'll quick question, and we'll need to pop Star and then one on your Touchtone telephone and withdraw your question. Please pumped per pound key.
And background noise and said you. Please mute your line. Once your question has been stated.
And this 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 there as well maybe I'll try first on cloud I don't know, if it's better to sundar or Ruth but can you just conceptually and help us understand how to think about the opportunity you scaled and after versus cloud and how it factors back into what you want to invest against the.
Opportunity or possibly maybe even accelerate the opportunity by looking at inorganic paths to grow and scale vis vis the competition in this space and then maybe for fill up if I can your Youtube continues to evolve as a platform. There's no subscription offerings you highlighted the strength, you're seeing and P. R. Could you talk a little bit about the past per monetization.
And the coming years, and how we should think about the opportunity against your large scaled audience and engagement you see it Youtube broadly that gives so much.
You know and cloud you know all of it.
Be asleep, we see a we see how early customers are and the shift.
We see the large Tam ahead, and and definitely the market dynamics and our momentum in the context of the market.
You know what what is the framework with which we are thinking about the scale of investments and the pace of investments.
Obviously, it's an area and which are you.
The longer you are in the cohorts that up and and so you know contributes more and the economies of scale starts working as well, but we are definitely investing ahead to make making sure we're able to serve the customers.
Globally across all of the offerings, they're interested and 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 and <unk>.
The thing to really position ourselves, while across industries and geographies and the key elements of it I tried to call out and opening comments investing and product go to market data centers and you can see it and the results I think New York and I continue to see US building there and that's you know what we're talking about building ahead, we are keenly focused.
And delivering for both customers and shareholders and that of course includes and 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 non existent three years ago and now it's one of our largest and fastest growing AD offerings on Youtube and.
And it was true refraction, and we're actually making 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 rejection and the first six months of 'twenty 'twenty and.
And they're really tapping into the tremendous and need commercial behavior on the platform 70 per cent of Youtube viewers are saying they bought a brand as a result of seeing it on Youtube talked about and the rail earlier.
Mr Class is another Great example, online learning has become a huge opportunity and they use truth and actually connect the right people the right content and saw really big and like Hunter and 40% increase and clicks to their sites 70 per cent increase and sign ups to courses and so on.
Youtube continues and our review to be amazing for brand advertisers as well and our brand business was hit hard and 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.
Reach more 18 to 49 year olds, and all linear television networks combined.
What's the time is increasing our advertising effectiveness is getting better and better and.
And so this is this is very very very nice development on the subscription strategy and maybe just briefly music is an incredibly popular vertical and Youtube and obviously a key part of the.
Overall experience and we found that you just wanted a premium experience and we.
Basically the ability to download songs and videos and Youtube freemium provides additional revenue streams of course, your music labels and publishers as well and 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.
Mhm and all.
Our next question comes firms and in Austin.
J P Morgan.
And.
Great. Thanks for taking my questions Ruth and Sundar I just wanted to follow up on Eric's question a bit.
Anything else you can add just in terms of the significant inflection that you saw and on Google cloud backlog, there and I guess and particular curious and what youre seeing in terms of benefit and successes, you're leveraging alphabet more broadly like and the four 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.
And maybe Oh lets talk with the.
Customers are looking for a digital transformation and depending on the sector. They are and they're definitely interested in.
A broader solution set across the breadth of what Google and alphabet and can bring.
You see this and health care are our efforts and Google Health.
Work, that's happening and verily all end up helping.
Florida is a great example of a.
Thinking longer term.
Not just for cloud, but Android auto powering their vehicles.
And so these are big big transformations are cutting across the company and.
And one of the areas, where we're really executing a is the leveraging our global business operations that Philip bronze and partnering closely with Thomas' teams and you know that's.
And that's definitely brings and 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.
Get into these long long term deals and so overtime and you know as you add more and cohorts that contributes.
To the margin structure.
It is.
You know the scale of the product offerings are the number of areas and the number of regions and the world.
And you know there is a much more significant investment and and so there is definitely a fixed cost structure associated with it and and we had also investing ahead, but as we scale up the business.
We expect that tends to be a favorable.
Thank you.
Yeah.
Thank you and our next question comes from Brent Thill from Jefferies. Your line is now open.
Good afternoon, you mentioned, you accelerated saw accelerating brand spend and 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 and out of the are the holiday season, all that'd be helpful. Thank you sure I'll I'll take that and that's as we.
And each noted the financial results really did reflect this increase and advertiser activity and that was in part unlocking budgets that they had paused earlier and here as well as really reflecting the increase in and consumer online activity.
And that really.
Largest contributor as Philip mentioned was retail and the largest contributor and year on year growth of the ads business and I would say tech media and entertainment as well as CPG were also meaningful contributors and for search and we saw ongoing improvement and advertisers Brent spend Bradley Bradley.
And for you to direct response, and Philip talked about really did maintain a very high level of growth and the acceleration and overall Youtube revenue growth reflects the pick up and brand advertising across all verticals on top of the ongoing strength that.
And that we saw and D. R. And then and network also at the same point, it's pick up and advertiser spend and Philip noted it was led by growth and Admob and AD manager. So we're really pleased with Q4, it was a great and to a challenging year and when we think about 'twenty 'twenty, one and I made the point and opening call.
And so obviously you have easier year on year comparisons and the first half as we anniversary the effects of the pandemic. So you know that's not much more to add we it was a strong quarter and we feel really good about the level of activity.
Thanks, Chris.
Thank you and then.
And it comes from Heath, Terry Goldman and pop your line and probably.
Great. Thank you very much appreciate the level of detail on the drivers behind the acceleration and 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 and new advertiser spend being being allocated to the to the platform.
Well I think the main point and sort of Mega comment that we saw a slowdown and its all upset and we've talked about on prior calls you know why.
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.
Our advertising ROI available you see advertising come back and I remember talking about this throughout last year that we had seen that's actually going back to the prior financial crisis and what you've seen is just a broad based reengagement and which were where we're really pleased about and across the P&L across industries.
And it's also as Phil noted in his comments are 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.
And good question.
Income from Ghana, and Morocco, and Morgan Stanley.
Hmm.
And for taking my questions I've I've two for fill up the first one and I appreciate all the color on and retail and commerce. The merchant community growing so strong last year I'd be curious to hear about 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 continue.
To help them as the as the World Reopens and the merchant discussions and then secondly.
A question on what are 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.
Yeah.
Yeah. 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, and 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 and relevant.
And we took some significant steps last year and you know on Google shopping and in many ways, we really see them as return to first principles here free listings Europe conventions really good feedback helps at all scenarios for him and retail and so we've become a great place for stores to connect with potential customers and whether its Mike.
And traffic to the websites for free listings or ads or it just didn't make it easier for purchases directly on Google and by the way, let me be clearer and also shopping and will continue to be a powerful way for retailers to promote their products obviously.
And 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 and we're giving retailers more choice, which is very well received by opening our platform to third party providers and we talked about starting with Paypal and Shopify, and we brought Youtube and to the.
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 and so I would say overall, it's a it's very very well received.
On the discovery side.
Discovering has grown Ah so discoveries discover and obviously discovery. So discover has grown dramatically since we launched it I think it just three years ago people.
People are loving, how we're surfacing and relevant information and gorgeous visuals, so all and will be called Borealis feeder experience and.
And naturally some of these experience are commercial and we made discovery ads generally available about six months ago, and I think what's may 'twenty and 'twenty and it's already reaching up to 3 billion people across discover Youtube Gmail and that's worldwide and.
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 Corey surfaces.
Yeah.
Great. Thanks.
Thank you and the next question comes from Colin Sebastian from Baird. Your line is now.
Great. Thank you very much good afternoon.
For Sundar or fill up a follow up on Youtube.
Just given the strength of those services.
Descriptions 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 and over the top over the last and the last nine months or so and then given some of the changing industry dynamics around privacy and <unk>.
And what you've already announced around and 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 and we've seen Brent steadily shifting budgets to Youtube to complement their linear TV buys as TV audience, and it's really become more fragmented and the traditional TV ratings continue to decline TV advertiser turning to streaming platforms like Youtube to reach people, who are no longer watching TV and connected Tvs are.
Fastest growing screen and the U S. We have over 100 million people debt watch Youtube and Youtube TV on their T V screens each month.
Youtube helps advertisers to reach younger audiences, they can't reach anywhere else and we've talked about it Youtube reaches more 18 to 49 year olds and all linear television networks combined.
And so there is an opportunity big opportunity for Youtube to help brands and agencies really more easily connect with this audience and we're very invested in this space and.
And just to give you a few examples and the second half of last year, we launched Youtube Mustang on television screens to help advertisers to drive awareness with large audiences and basically single moment. Many are taking advantage of it Uber and many others and we love.
And Brent lift for Youtube and keep your screams screens to really help advertisers make informed decisions about AD performance optimize streaming campaigns and real time and so on and we also made it possible last year for advertisers to basically buy among the most popular Youtube and 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 and yeah, we were taken over responsibility at your user privacy and to supporting our partners and 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 third party cookies with a set of privacy preserving mechanisms for the weapon and we're making great progress.
We've shared a detailed proposal with the industry for experimentation and feedback and we shared recently as well or what we call flock or a federated learning of cohorts API and.
Would you be think provides an effective replacement single for third party cookies and and we really believe privacy sandbox is the best path forward and we remain very committed to our collaboration with the ads and guarantee on privacy preserving open standard mechanisms that can we call sustained and healthy and AD supported web.
Okay. Thanks Julie.
Yeah.
Thank you and then.
And it comes from Michael and loop and Couldnt come up.
Your line is growth.
Thanks.
I was following up on Collyns question just perfectly.
I wanted to understand a framework should be clear that figure.
But the bigger opportunity longer term.
They are already high praise and streaming video right. So you're happy with the progress of Youtube TV and so far what do you see.
Turning to other countries and he could contrast that versus the opportunity you see.
And secondly, T V and devices and you've done for Google and TV and 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 and if you take the inventory from.
And from the traditional Youtube advertising.
Maybe I'll comment on our you know one of the things that just book both for Google over the years as you know, we really try to reach users where they are and that's that Louis work always even Mr. Debt you know cross platform.
And this is 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 and Google TV Chromecast.
[noise] tube TV as a whole a whole itself and.
And I think we are taking.
Long term view here, obviously focused on the user experience and really really getting it all to work well.
And we know why the smartphone and sort of the center for Youtube T vs and important form factor and overtime.
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 as well and seismic transcribed sizes, but we take a long term view.
And 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.
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 customers that have a very strong interest and advertising and streaming environments and I mentioned, how we combine it into single lineups are so so that's an interesting path going forward.
Okay.
And our next question comes from Stephen sales and kind of.
Yeah and probably.
Okay. Thank you so much so soon though and I think let's.
I think you've recently.
About a 10 to 20 year journey for AI and quantum computing to unlock new use cases, and I think you've brought up in the past some of the ways AI is helping you with the products that you have and market right now, but you know and.
And so you take a more longer term look into the future or what do you think some of the new applications.
Could be and I think a fill up it might've been in a few years ago. When you were speaking about and investor confidence and you called out the desire to onboard and help smbs, particularly and as they really had no way to advertise before and Google and online and 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 and easy to use set of tools to help those who otherwise don't really have agency representation.
And so that they can reach all the different customers that they would you'd be reaching across all the debt for services that you're offering. Thanks.
Thanks, Steve and L. A and so they I parse apart first.
You know, we've always wanted to be and a foundational and how we approach.
And technological advances and that's that's the core competency V and mist and across the company and.
And one of the largest R&D and Mr and the world and obviously AI AI is a big part of it.
Just and I'm really excited that our you know we over the past few years, while we have made progress and you know understanding different modalities be it.
Text images.
No worries vision et cetera.
There is we definitely you know I think we had an inflection point and are you now and we are investing to build better models and deepen our understanding and do it and the more generalized way and when we do that it'll apply horizontally across our products.
And you saw version of that when we ship book and search and was one of our biggest quality improvements Ah, but you'll see that flow of Crosby, and Google search Youtube and.
Android as well as our investments and alphabet be it a self driving cars are a robotics. So we you know we take that view and definitely want and make sure. We are driving state of the art promise flow.
Yes. So first let me recognize I mean and has obviously been a very very challenging environment for smbs and many weren't online and 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 and navigate and pivot and and.
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 growth, particularly the number of smaller and.
Advertisers are smbs and.
We're helping them see shifts and supply and demand not just across sectors, but actually within sectors for.
For example, travel continues to get hit as hard to pretty heart and after the initial lockdown last year and searches for vacation homes and give them your rentals, so huge spikes and that.
Continues to fluctuate.
On the other hand, and look at our retail demand isn't disappearing and shifting in many cases, we're seeing increases and searches for things like gym equipment crafts Ah patient heaters.
And so and anything related to outdoor activity and so on.
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 and making it a lot easier for merchants to connect with customers and especially now and the crisis and.
And 2020, we added new features to for example to provide Covid updates our service changes and you attribute like take out delivery curbside pickup and they'll all easily available for consumers and.
Maps to connect them to their favorite Smbs, and so really incredible investment frankly from our side and I think it's very well received.
Yeah.
Right.
Yeah.
Thank you and Mike and Craig.
Great Great question in English and French.
The total accomplish that goal and they can go and people only closing remark.
Thanks, everyone for joining us today, we look forward to speaking with you again and our first quarter 2021 call. Thank you and have a good evening.
Okay, that's great.
Conference call.
And you may now disconnect.
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