Q4 2023 Alphabet Inc Earnings Call
Welcome everyone. Thank you for standing by for the alphabet fourth quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone I would now like to hand, the conference over to your Speaker today, Jim Friedland Director of Investor Relations. Please go ahead.
Jim Friedland: Thank you good afternoon, everyone and welcome to alphabet fourth quarter 2023 earnings Conference call.
Jim Friedland: With us today are Sundar, Pichai, Philipp Schindler and route threat.
Jim Friedland: Now I'll quickly cover the safe Harbor.
Jim Friedland: Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking.
Jim Friedland: Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.
Jim Friedland: Actual results could differ materially please refer to our forms 10-K, and 10-Q, including the risk factors discussed in our upcoming Form 10-K filing for the year ended December 31, 2023, we undertake no obligation to update any forward looking statements.
Jim Friedland: 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 forward slash investor or.
Jim Friedland: Our comments will be on year over year comparisons unless we state otherwise and now I'll turn the call over to Sundar.
Sundar: Hello, everyone.
Sundar: Sales reflect strong momentum and product innovation continuing into 2024.
Sundar: Today I'm going to talk about full main topics one our investments in the AI, including how it's helping search.
Sundar: Two subscriptions, which reached $15 billion in annual revenue up five X since 2019.
Sundar: Subscriptions is growing strongly powered by Youtube premium on music Youtube TV and Google one.
Sundar: Three cloud, which crossed $9 billion in revenues this quarter and saw accelerated growth driven by our gen AI and product leadership.
Sundar: And for our investments and focus to meet the growth opportunities ahead.
Sundar: First AI and search.
Sundar: As you know we have long lead debate and using AI to improve many of our products from search to ads.
Sundar: Most of our consumer and enterprise products, helping billions of people already.
Sundar: Last year brought new excitement around Gen AI and I'm proud of how we responded responsibly with deep advances in foundation models and a number of great launches.
Operator: Welcome, everyone. Thank you for standing by for the Alphabet Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Sundar: Closed the year by launching the Gemini era, a new industry, leading cities of models that will fuel the next generation of advances.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. I would now like to hand the conference over to your speaker today, Jim Friedland, Director of Investor Relations. Thank you. Good afternoon, everyone, and welcome to Alphabet's fourth quarter 2023 earnings conference call. With us today are Sundar Pichai, Philipp Schindler, and Ruth Porat. Now, I'll quickly cover the safe harbor.
Sundar: Gemini has the first realization of division, we had when we formed Google Deep mine, bringing together our two world class research teams.
Sundar: It's engineered to understand and combined text images audio video and code in a natively multimodal way and it can run on everything from mobile devices to data centers.
Sundar: <unk> gives us a great foundation, it's already demonstrating state of the art capabilities, and it's only going to get better.
Jim Friedland: Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. However, actual results could differ materially.
Sundar: Germany Ultra is coming soon and the team is already working on the next versions and bringing it to our products.
Sundar: That starts with search we had already experimenting with Gemini and search, but it's making our third generate a experience or S G fast or for users.
Jim Friedland: Please refer to our Forms 10-K and 10-Q, including the risk factors discussed in our upcoming Form 10-K filing for the year ended December 31, 2023. We undertake no obligation to update any forward-looking statements. 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.xyz forward slash investor. Our comments will be on year-over-year comparisons unless we state otherwise. And now, I'll turn the call over to Sundar.
We have seen a 40% reduction in latency in English in the U S.
Sundar: I'm happy with what we're seeing in the earliest days of S. G. It's available through search labs in seven languages.
Sundar: By applying generator of AI to search we are able to serve a wider range of information needs and answer new types of questions, including those that benefit from multiple perspectives.
Sundar: People are finding it particularly useful for more complex questions like comparisons are longer queries.
Sundar: Also helpful in areas, where people are looking for deeper understanding such as education or even gift ideas we.
Sundar Pichai: Hello everyone. Our results reflect strong momentum and product innovation continuing into 2024. Today I'm going to talk about four main topics. One, our investments in AI, including how it's helping search. 2.
Sundar: We are improving satisfaction, including answers for more conversational and intricate queries.
Sundar: As I mentioned earlier, we are surfacing more links with S. G and linking to a wider range of sources on the results page and we will continue to prioritize approaches that add value for our users and send valuable traffic to publishers.
Sundar Pichai: Subscriptions, which reach $15 billion in annual revenue, up 5x since 2019. Subscriptions are growing strongly, powered by YouTube Premium and Music, YouTube TV, and Google One.
Sundar: Beyond S. G. We are continuing to use AI to make searching more accessible and intuitive.
Sundar Pichai: Cloud, which crossed $9 billion in revenues this quarter and saw accelerated growth driven by our Gen-AI and product leadership. And four, our investments and focus to meet the growth opportunities ahead. First AI Insert As you know, we have long led the way in using AI to improve many of our products, from search to ads, to most of our consumer and enterprise products, helping billions of people already. Last year brought new excitement around GenAI, and I'm proud of how we responded, responsibly with deep advances in foundation models and a number of great launches. We close the year by launching the Gemini Era, a new industry-leading series of models that will fuel the next generation of advances. Gemini is the first realization of the vision we had when we formed Google DeepMind, bringing together our two world-class research teams. It's engineered to understand and combine text, images, audio, video, and code in a natively multimodal way, and it can run on everything from mobile devices to data centers. Gemini gives us a great foundation, it's already demonstrating state-of-the-art capabilities, and it's only going to get better. Gemini Ultra is coming soon.
Sundar: Circle to search lets you search what you see on Android phones with a simple gesture without switching apps, it's available starting to speak on Pixelate in Pixelate pro and the new Samsung Galaxy S 24 cities.
Sundar: And Lance now offers generate of AI or views you can add techs to a visual search to ask questions about anything youll see and get AI powered insights in the moment.
Sundar: In addition to search we are also seeing a lot of interest in our AI powered solutions for advertisers.
Sundar: That includes our new conversational experience that users Gemini to accelerate the creation of search campaigns.
Sundar: Then there is barred our conversational AI tool that complement search it's now powered by Gemini Pro and is much more capable of things like understanding summarizing reasoning coding and planning.
Sundar: It is now in over 40 languages and over 230 countries around the world.
Sundar: Looking ahead, we will be rolling out an even more advanced version for subscribers powered by Gemini Altra.
Speaker Change: That's a good segue to subscriptions.
As I said earlier it is now a $15 billion business annually.
Youtube is the key driver of our subscription revenues.
Sundar Pichai: The team is already working on the next versions of Gemini and bringing it to our product. That starts with... We are already experimenting with Gemini in search, where it's making our search-generative experience, or SGE, faster for users. We have seen a 40% reduction in latency in English in the U.S. I'm happy with what we are seeing in the earliest days of SGE. It's available through Search Labs in seven
Speaker Change: Available in over 100 countries and regions Youtube music and premium have real momentum.
Speaker Change: They're engaging passionate users and driving great returns for the music industry and creators.
Speaker Change: Youtube TV is also doing well.
Speaker Change: <unk> had great consumer feedback on the viewing experience people loved the navigation multi view and unlimited DVR.
Speaker Change: NFL Sunday ticket is found its perfect home on Youtube and Philip will talk about that more.
Sundar Pichai: By applying generative AI to search, we are able to serve a wider range of information needs and answer new types of questions, including those that benefit from multiple perspectives. People are finding it particularly useful for more complex questions like comparisons or longer queries. It's also helpful in areas where people are looking for deeper understanding, such as education or even gift ideas.
Speaker Change: Let me also talk about our subscription service Google one.
Speaker Change: It's doing incredibly well with strong user growth.
Speaker Change: It provides expanded storage unlocks exclusive features and Google products and allows us to build a strong relationship with our most engaged users. Google one is growing very well and we are just about to cross 100 million subscribers.
Sundar Pichai: We are improving satisfaction, including answers for more conversational and intricate queries. As I mentioned earlier, we are surfacing more links with SGE and linking to a wider range of sources on the results page, and will continue to prioritize approaches that add value for our users and send valuable traffic to publishers. Beyond SGE, we are continuing to use AI to make searching more accessible and intuitive. Circle to Search lets you search what you see on Android phones with a simple gesture without switching apps.
Speaker Change: From here, we are going to bring in more AI features and look forward to more strong growth to come.
Speaker Change: Next Google cloud throughout 2023, we introduced thousands of product advances, including broad Gen AI capabilities across our AI infrastructure, our vertex AI platform and our new do what AI agents in Q4, our product engine AI leadership enabled us to win and expand relationships.
Speaker Change: Trips with many leading brands, including hugging face Mcdonald's Motorola mobility and Verizon.
Sundar Pichai: It's available starting this week on Pixel 8 and Pixel 8 Pro and the new Samsung Galaxy S24 series. And LensNow offers generative AI overviews. You can add text to a visual search to ask questions about anything you see and get AI-powered insights in the moment. In addition to search, we are also seeing a lot of interest in our AI-powered solutions for advertising, which include our new conversational experience that uses Gemini to accelerate the creation of search campaigns. Then there is BOD, our conversational AI tool that complements SEARCH. It's now powered by Gemini Pro and is much more capable at things like understanding, summarizing, reasoning, coding, and planning. It's now in over 40 languages and in over 230 countries around the world.
Speaker Change: Google Cloud offers our AI hype, a computer a groundbreaking supercomputing architecture that combines a powerful tpu's in Gpus, AI software and multi slice and multi host technology to provide performance and cost advantages for training and serving models custom.
Speaker Change: Customers like Anthropic character, AI, essentially AI and Mr. Ali <unk>, our building in serving models on it.
Speaker Change: For developers building Gen AI applications, we offer vertex AI, a comprehensive enterprise AI platform.
Speaker Change: It helps customers like Deutsche Telekom, and Moody's discover customize augment and deploy or $1 30, Gen AI models, including Palm Med, Pom, Pom and Gemini as well as popular open source and partner models.
Speaker Change: What I can say I have seen strong adoption with the API requests increasing nearly six six from heche want to hedge too last year.
Sundar Pichai: Looking ahead, we'll be rolling out an even more advanced version for subscribers powered by Gemini Ultra. That's a good segue to subscriptions. As I said earlier, it's now a $15 billion business annually, and YouTube is the key driver of our subscription revenue. Available in over 100 countries and regions, YouTube Music and Premium have real momentum. They're engaging passionate users and driving great returns for the music industry and creators. YouTube TV is also doing well. We've had great consumer feedback on the Viewing XP. People love the navigation, multi-view, and unlimited DVR. NFL Sunday Ticket has found its perfect home on YouTube, and Philipp will talk about that more.
Speaker Change: Using vertex AI, Samsung recently announced its galaxy S 24 cities smartphone with Gemini and imagine to our advanced textile image model.
Speaker Change: <unk> stock is added imagine two to their AI image generator, enabling users to turn simple text prompts into unique visuals and.
Speaker Change: In Victoria's Secret and company will look to personalize and improve the customer experience with Gemini vertex AI search and conversations.
Speaker Change: Customers are increasingly choosing do it AI are packaged AI agents for Google workspace, and Google cloud platform to boost productivity and improve their operations.
Since its launch thousands of companies and more than a million trusted testers have us do it AI it will incorporate Gemini soon.
Sundar Pichai: Let me also talk about our subscription service, Google Watch. It's doing incredibly well with strong user growth. It provides expanded storage, unlocks exclusive features in Google products, and allows us to build a strong relationship with our most engaged users.
Speaker Change: In workspace do what AI is helping employees benefit from improved productivity and creativity.
Speaker Change: Since of paying customers around the world, including Singapore Post Uber and Woolworths.
Sundar Pichai: Google One is growing very well, and we are just about to cross 100 million subscribers. From here, we are going to bring in more AI features and look forward to more strong growth in the future. Next, Google Cloud. Throughout 2023, we introduced thousands of product advances, including broad Gen AI capabilities across our AI infrastructure, our Vertex AI platform, and our new Do-IT AI. In Q4, our product and Gen-AI leadership enabled us to win and expand relationships with many leading brands, including Hugging Face, McDonald's, Motorola Mobility, and Verizon. Google Cloud offers our AI Hypercomputer, a groundbreaking supercomputing architecture that combines our powerful TPUs and GPUs, AI software, and multi-slice and multi-host technology to provide performance and cost advantages for training and serving models. Customers like Anthropic, Character AI, Essential AI, and Mistral AI are building and serving models on it for developers building Gen AI Applications.
Speaker Change: And Google Cloud platform do what AI assist software developers and cyber security analysts do what AI for developers is the only G&A I offering to support the complete development and operations lifecycle fine tuned with our customer's own court corpus and policies.
It's helping way fair GE appliances, and commerzbank right better software faster with AI caught completion cogeneration and chat support.
Speaker Change: We'll do it AI and security operations, we are helping cyber security teams at Fiserv, Spotify and Pfizer.
Speaker Change: Our robust growth has been driven by strong direct and indirect channels with Isps, we've nearly tripled our number of cross sell deals from 'twenty to 'twenty, two to 'twenty or 'twenty three.
Speaker Change: Our ecosystem there are nearly 90000, Google cloud journey I enable consultants and Accenture has teamed up with Google Cloud created joined generative AI Center of excellence.
Speaker Change: Next let me turn to our focus and discipline as we pursue the opportunities ahead.
Sundar Pichai: We offer Vertex AI, a comprehensive enterprise AI platform. It helps customers like Deutsche Telekom and Moody's discover, customize, augment, and deploy over 130 Gen AI models, including Palm, MedPalm, SecPalm, and Gemini, as well as popular open source and partner models. Vertex AI is seeing strong adoption with API requests increasing nearly 6x from H1 to H2 last year. Using Vertex AI, Samsung recently announced its Galaxy S24 series smartphone with Gemini and Imagine 2, our advanced text-to-image models. Shared a stock image as added Imagine 2 to their AI image generator, enabling users to turn simple text prompts into unique visuals, and Victoria Secret & Company will look to personalize and improve the customer experience with Customers are increasingly choosing DeWitt AI, our packaged AI agents for Google Workspace and Google Cloud Platform, to boost productivity and improve their operations. Since its launch, thousands of companies and more than a million trusted testers have used Do-IT-AI. It'll incorporate Gemini soon. In the workspace, Duet AI is helping employees benefit from improved productivity and creativity at thousands of paying customers around the world, including Singapore Post, Uber, and Woolworths. In Google Cloud Platform, Duvet AI assists software developers in cybersecurity analysis.
Speaker Change: Search Youtube and cloud are supported by our state of the art compute infrastructure.
Speaker Change: This infrastructure is also key to realizing our big ambitions, it's a major differentiator for us.
Speaker Change: Continuing to invest responsibly in our data centers and compute to support this new wave of growth in the AI powered services for us and for our customers.
Speaker Change: Through this we are being disciplined in how we run the company.
Speaker Change: You've heard me talk about our efforts to Durably reengineer, our cost base and to improve our velocity and efficiency that work continues team.
Speaker Change: Teams are working to focus on key priorities and execute fast removing layers and simplifying their organizational structures.
Just one example, our devices team has brought together different teams from across nest Fitbit and other teams into a new functional structure. This will help us pull resources and drive progress across our pixel portfolio.
Speaker Change: Across different teams, we have wound down some non priority projects, which will help us invest and operate well in our growth areas.
We're also improving our machine utilization building on our years of experience in driving cost efficiencies in our computing infrastructure and operations and.
Speaker Change: And through our supplier efficiency efforts and automation of certain processes, we've made major improvements in areas like procurement achieving significant savings.
Speaker Change: That's a snapshot of the quarter before I close a couple of other highlights.
Sundar Pichai: DeWitt AI for Developers is the only JNAI offering to support the complete development and operations lifecycle, fine-tuned with a customer's own code corpus and policy. It's helping Wayfair, GE Appliances, and Commerzbank write better software, faster with AI code completion, code generation, and chat. With DeWitt AI and security operations, we are helping cybersecurity teams at Fiserv, Spotify, and Pf Our robust growth has been driven by a strong direct and indirect channel. With ISVs, we have nearly tripled the number of co-sell deals from 2022 to 2023. In our ecosystem, there are nearly 90,000 Google Cloud GenAI-enabled consultants, and Accenture has teamed up with Google Cloud to create a joint generative AI center of excellence.
Speaker Change: Pixelate, our AI first phone was awarded phone off the year by numerous outlets. It now uses Gemini nano with features like magic can pose for Google messages and more to come.
Speaker Change: In our other bets portfolio of companies Venmo, which is deeply focused on safety reassure 1 million fully autonomous ride hailing trips.
Speaker Change: And isomorphic labs entered into strategic partnerships with Eli Lilly and Novartis to apply AI to treat diseases, which has great potential.
Speaker Change: 2023 was a year of profound innovation and product momentum.
Speaker Change: To our many partners we succeed when our partners do.
Speaker Change: We are grateful for the work, we do together from our partners across the Android ecosystem, who were on display at CES.
Speaker Change: Our deep relationships with retailers small businesses and advertising partners to.
Speaker Change: To the next generation of AI start ups and developers and many more.
Sundar Pichai: Next, let me turn to our focus and discipline as we pursue the opportunities ahead. Search, YouTube, and cloud are supported by our state-of-the-art compute infrastructure. This infrastructure is also key to realizing our big AI ambition. It's a major differentiator for us.
Speaker Change: I also want to thank all of our employees for their hard work throughout 2023, and the start of the new year I'm excited for what's ahead in 2020 for Philip.
Speaker Change: Thanks, Sundar and hi, everyone Google.
Speaker Change: Google services revenues of 76 billion were up 12% year on year.
Sundar Pichai: We continue to invest responsibly in our data centers and compute to support this new wave of growth in AI-powered services for us and for our customers. Through this, we're being disciplined in how we run the company. You've heard me talk about our efforts to durably re-engineer our cost base and to improve our velocity and efficiency. That work continues.
In Google advertising search and other revenues grew 13% year on year led again by solid growth in the retail vertical.
Speaker Change: We had particular strength in retail in APAC, a trend that began in the second quarter of 2023 and continue through the end of the year.
Speaker Change: Youtube ads revenue were up 16% year on year driven by growth in both direct response and brand.
Sundar Pichai: Teams are working to focus on key priorities and execute fast, removing layers and simplifying their organizational structure. As just one example, our Devices team has brought together different teams from across Nest, Fitbit, and other teams into a new functional structure. This will help us pool resources and drive progress across our pixel portfolio. Across different teams, we have winded down some non-priority projects, which will help us invest and operate well in our growth areas. We're also improving our machine utilization, building on our years of experience and driving cost efficiency in our Computing Infrastructure and Operations. And through our supplier efficiency efforts and automation of certain processes, we have made major improvements in areas like procurement, achieving significant savings. That's a snapshot of the quarter.
Speaker Change: And network revenues declined 2% year on year.
Speaker Change: In subscriptions platform some devices, which was previously named Google other year on year revenues increased 23% driven by strong growth in subscriptions.
Speaker Change: Now for some color on the quarter and where we see continued upside for long term advertising growth.
Speaker Change: Over the last few calls I have consistently highlighted how we're putting Google AI to work for our customers to deliver profitability and help them achieve their goals and do more with less environment.
Speaker Change: From a product perspective in Q4 performance mix remained a bright spot.
Speaker Change: We're also excited about demand Gen momentum.
Speaker Change: This is our big bet to help social advertisers find and convert consumers via immersive relevant visual creatives across Youtube, including Youtube shorts, Gmail and discover.
In a single campaign, you get access to over 3 billion users as they streams sgro connect and decide what to buy.
Sundar Pichai: Before I close, a couple of other highlights. Pixel 8, our AI-first phone, was awarded phone of the year by numerous publications... It now uses Gemini Nano with features like Magic Compose for Google Messages and more to come.
Speaker Change: Tens of thousands of advertisers for testing and on average seeing 6% more conversions per dollar where this image only adds in discovery campaigns.
Speaker Change: As we look ahead, we're also starting to put generate if AI at the hands of more and more businesses to help them build better campaigns and even better performing ads.
Sundar Pichai: In our Other Bets portfolio of companies, Waymo, which is deeply focused on safety, reached over 1 million fully autonomous ride-hailing customers, and Isomorphic Labs entered into strategic partnerships with Eli Lilly and Novartis to apply AI to treat diseases, which has great potential. 2023 was a year of profound innovation and product momentum. Thank you to our many partners. We succeed when our partners do, and we are grateful for the work we do
Speaker Change: Automatically created assets help advertisers show more relevant search ads by creating tailored headlines and descriptions based on each ads context adoption was up with strong feedback in Q4 in.
Speaker Change: In addition to now being available in eight languages more advance Gen. AI powered capabilities are coming to <unk>.
Speaker Change: And then last week's Big news was that Gemini will power, new conversational experience and Google apps.
Speaker Change: This is the open beta to U S and UK advertisers early tests show advertisers are building higher quality search campaigns with less effort, especially smbs were 42% more likely to publish a campaign with good or excellent at strength, we can't wait to see how this continues to drive performance and level the playing.
Sundar Pichai: From our partners across the Android ecosystem who are on display at CES, to our deep relationships with retailers, small businesses, and advertising partners, to the next generation of AI startups and developers and many more. I also want to thank all of our employees for their hard work throughout 2023 and the start of the new year. I'm excited for what's ahead in 2025. Philip.
Speaker Change: Yield for advertisers of all sizes.
Speaker Change: As we shared last quarter ads will continue to play an important role in the new search experience and we'll continue to experiment with new formats native to SG.
Philipp Schindler: Thanks Sundar, and hi everyone. Google services revenues of $76 billion were up 12% year-on-year. In Google advertising, Search & Other Revenues grew 13% year-on-year, led again by solid growth in the retail vertical. We had particular strength in retail in APAC, a trend that began in the second quarter of 2023 and continued through the end of the year. YouTube ads revenue was up 16% year-on-year, driven by growth in both direct response and brand, and Network revenues declined 2% year-on-year.
Speaker Change: S. G is creating new opportunities for us to improve commercial journeys for people by showing relevant ads alongside search results. We've also found that people are finding as either above or below the AI powered overview helpful. As they provide useful options for people to take action and connect with businesses.
Speaker Change: Looking at our strong search performance for the fourth quarter retail was a highlight we continue to see a stronger start to the season up to and including cyber five in Q3, we indicated that we're seeing early trends of consumers being very price conscious and we saw this play out in Q4 with promotional demand it in.
Philipp Schindler: In subscriptions, platforms, and devices, which was previously named Google Other, year-on-year revenues increased 23 percent, driven by strong growth in subscriptions. Now for some color on the quarter and where we see continued upside for long-term advertising growth. Over the last few calls, I have consistently highlighted how we're putting Google AI to work for our customers to deliver profitability and help them achieve their goals in a do more with less environment. From a product perspective, in Q4, Performance Max remained a bright spot. We're also excited about the ManGen moment.
Speaker Change: All time high deal secrets, using Google had access to two times the deals in the U S versus last season, as well as a better shopping experience.
Speaker Change: Launches included a one stop shop deals destination, new filters like get it fast and AI generated gifting recommendations and SG. These new features drove incremental core growth during key shopping moments like cyber five.
Speaker Change: Our proven AI powered AD solutions were also wind for retailers looking to accelerate omni growth and capture holiday demand.
Philipp Schindler: This is our big bet to help social advertisers find and convert consumers via immersive, relevant visual creatives across YouTube, including YouTube Shorts, Gmail, and Discover. In a single campaign, you get access to over 3 billion users as they stream, scroll, connect, and decide what to buy. Tens of thousands of advertisers are testing and on average seeing 6% more conversions per dollar versus image-only ads in discovery campaigns. As we look ahead, we're also starting to put generative AI in the hands of more and more businesses to help them build better campaigns and even better performing ads. Automatically created assets help advertisers show more relevant search ads by creating tailored headlines and descriptions based on each ad's content. Adoption was up with strong feedback in Q4. In addition to now being available in eight languages, more advanced GenAI-powered capabilities are coming to ACA.
Speaker Change: Examples include a large U S big box retailer, who drove a 60% plus increase in omni rollout and a 22% plus increase in store traffic using performance Max during cyber five.
Speaker Change: And the well known global fashion brand, who drove a 15% plus higher omnichannel conversion rate versus regular shopping traffic by showcasing its store pickup offering across top markets through pick up later on shopping apps.
Speaker Change: Moving onto Youtube, we're obviously pleased with Youtube advertising revenue growth in Q4, and also significant growth in our subscription revenue.
Speaker Change: I'll reiterate what I have said before Youtube success starts with greater success, we give millions of creators more ways to create content and connect with fans and more ways to make money and build their own businesses than any other platform.
Philipp Schindler: And then last week's big news was that Gemini will power a new conversational experience in Google Ads. This is currently in Open Beta for US and UK advertisers. Early tests show advertisers are building higher-quality search campaigns with less effort, especially SMBs, who are 42% more likely to publish a campaign with good or excellent ad strength. We can't wait to see how this continues to drive performance and level the playing field for advertisers of all sizes. As we shared last quarter, ads will continue to play an important role in the new search experience, and we will continue to experiment with new formats native to SGE.
Speaker Change: More creators it means more content, which leads to more viewers and via ads and subscriptions. These viewers fund our creators and drive the eyeballs and engagement our advertisers want.
Speaker Change: To keep this momentum going we're focused on delivering value across four pillars creation views monetization and responsibility first creation, which increasingly takes place on mobile devices. We've invested in a full suite of tools, including our new Youtube create for shorts to help people make everything from 15th.
Speaker Change: Second short 215 minute videos to 15 or a life streams with a production studio in the palm of their hands.
Speaker Change: AI is supercharging these capabilities anyone with a phone can swap in and you backdrop remove background extras translate their video into dozens of languages, all without a big studio budget.
Philipp Schindler: SGE is creating new opportunities for us to improve commercial journeys for people by showing relevant ads alongside search results. We've also found that people are finding ads either above or below the AI-powered overview helpful, as they provide useful options for people to take action and connect with businesses. Looking at our strong search performance for the fourth quarter, retail was a highlight. We continue to see a stronger start to the season, up to and including Cyber 5.
Excited about our first products in this area from dream screen for AI generated backgrounds to allowed for AI powered thumping there is more to come.
Speaker Change: Number two views we continue to grow watch time across Youtube was strong growth in shorts and connected TV <unk>.
Philipp Schindler: In Q3, we indicated that we were seeing early trends of consumers being very price conscious, and we saw this play out in Q4. With promotional demand at an all-time high, deal seekers using Google had access to twice as many deals in the U.S. versus last season, as well as a better shopping experience. Launches included a one-stop-shop deals destination, new filters like Get It Fast, and AI-generated gifting recommendations in SGE. These new features drove incremental query growth during key shopping moments like CyberFive. Our proven AI-powered ad solutions were also a win for retailers looking to accelerate omni-growth and capture holiday demand. Quick examples include a large U.S. big box retailer who drove a 60% plus increase in Omni ROAS and a 22% plus increase in store traffic using Performance Max during Cyber 5, and a well-known global fashion brand that drove a 15% plus higher omni-channel conversion rate versus regular shopping traffic by showcasing its store pick-up offering across top markets through pick-up later on shopping ads. Moving on to YouTube,
Speaker Change: <unk> remains a top priority, we have 2 billion plus logged in users every month, if we're averaging 70 billion in daily views.
Speaker Change: Connected Tvs or what we refer to as the living room is where viewership is growing the fastest we're investing to make this experience even better with interactive features tailored to Tvs plus the content people love our creators NFL Sunday ticket and a range of life sports and studio content via Youtube TV and primetime channels.
Speaker Change: Put this altogether and Youtube is the must have app on every connected TV.
Speaker Change: Monetization is pillar number three and realized through a combination of AD supported and subscription offerings.
Speaker Change: Advertising generates the bulk of our revenue and we continue to invest heavily here.
Speaker Change: We've ruled out CTV first formats like 32nd non Skippable ads and pause experiences as well as an industry first send to foreign experience that lets people use a second screen to engage with us.
Speaker Change: For shorts, we've developed new formats that are less interrupted to viewers. It's early we're learning, but excited by the opportunities for ads. This can unlock shorts monetization continues to progress nicely.
Philipp Schindler: We're obviously pleased with YouTube's advertising revenue growth in Q4 and also significant growth in our subscription revenue. I'll reiterate what I have said before: YouTube success starts with creator success. We give millions of creators more ways to create content and connect with fans, and more ways to make money and build their own businesses than any other platform. More creators mean more content, which leads to more viewers. And via ads and subscriptions, these viewers fund our creators and drive the eyeballs and engagement our advertisers want. To keep this momentum going, we're focused on delivering value across four pillars: creation, viewers, monetization, and responsibility. First, creation, which increasingly takes place on mobile devices. We've invested in a full suite of tools, including our new YouTube Create app for Shorts, to help people make everything from 15-second clips to 15-minute videos to 15-hour live streams with a production studio in the palm of their hand. GenAI is supercharging these capabilities. Anyone with a phone can swap in a new backdrop, remove background extras, and translate their video into dozens of languages, all without a big studio budget.
Speaker Change: Our AI powered video formats from video reach and video views campaigns to dimension and video action continued to make advertiser dollars go further and drive results across the funnel.
Speaker Change: We're also introducing new and existing advertisers to Youtube via sports content, 90, plus upfront and scatter advertisers, including Unilever are partnering with Youtube first year across NFL Sunday ticket in game advertising opportunities.
Speaker Change: Our subscription offerings are also growing at a healthy clip Youtube music and premium performed well.
Speaker Change: Premium users are delivering more value to our partners and Youtube and even AD supported users do.
Speaker Change: On average each additional premium sign up boost earnings for creators music and media partners and Youtube itself.
Speaker Change: And we've made premium even more attractive with new features bundles and other enhancements.
Speaker Change: We're also pleased with our first season of NFL Sunday ticket. It gave creators new opportunities to create content and feed user engagement across traditional user content and professional sports content.
Speaker Change: Feedback on the user experience, including multi view has been great. We're excited to continue to innovate here.
Speaker Change: Responsibility is our fourth pillar and it underlines everything we do across Youtube will continue to focus relentlessly on this.
Speaker Change: As always deepening our relationships with key partners to bring them. The best of Google is a key priority for us and we continue to do this across industries. In Q4, we just talked about the NFL Sunday mentioned, Samsung among others earlier.
Philipp Schindler: We're excited about our first products in this area, from DreamScreen for AI-generated backgrounds to Alloud for AI-powered dubbing. There's more to come. 2. View Us We continue to grow Watch Time across YouTube with strong growth in shorts and connected TV. Shorts remain the top priority.
Speaker Change: Another highlight was our expanded partnership with Porsche to enhance customers' digital experiences with a deeper in vehicle integration of Google built in services, including Google maps and play.
Speaker Change: Whether it's continued collaboration with our partners in key ecosystems, we're putting Google AI to work for more customers I'm excited about the opportunities for continued impact in 2024.
Philipp Schindler: We have 2 billion plus logged-in users every month, and we're averaging 70 billion daily views. Connected TVs, or what we refer to as the living room, are where viewership is growing the fastest. We're investing to make this experience even better, with interactive features tailored to TVs, plus the content people love. Our creators, NFL Sunday Ticket, and a range of live sports and studio content via YouTube TV and Primetime Channel. Put this all together, and YouTube is the must-have app on every connected TV.
Speaker Change: I'll wrap with a huge note of gratitude to our customers and partners. Our success is only possible because of their success and then to our googlers for their outstanding work and focus this year roof over to you.
Speaker Change: Thank you Philip we are very pleased with our full year results with 2023 Alpha that revenues of 307 billion up 9% versus 2022, which added <unk> 25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86 3 billion.
Speaker Change: Up 13% versus last year in both reported and constant currency search remained the largest contributor to revenue growth my comments will be on year over year comparisons for the fourth quarter unless I state otherwise.
Philipp Schindler: Monetization is pillar number three and realized through a combination of ad-supported and subscription offerings. Advertising generates the bulk of our revenue, and we continue to invest heavily here. We've rolled out CTV-first formats like 30-second non-skippable ads and pause experiences, as well as an industry-first send-to-phone experience that lets people use a second screen to engage with apps. For Shorts, we've developed new formats that are less interruptive to viewers.
Speaker Change: Total cost of revenues was $37 6 billion up 6%.
Speaker Change: Other cost of revenues was $23 6 billion up 5% with the increase driven primarily by content acquisition costs associated with Youtube subscription offerings.
Speaker Change: The growth rate also reflects the offsetting benefit of a lapping 1.2 billion and <unk>.
Speaker Change: Tori related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives. We made starting in the first quarter of 2023.
Philipp Schindler: It's early, we're learning, but excited by the opportunities for ads this can unlock. Shorts monetization continues to progress nicely. Our AI-powered video formats, from video reach and video view campaigns to demand gen and video action, continue to make advertiser dollars go further and drive results across the funnel. We're also introducing new and existing advertisers to YouTube via sports content. Ninety-plus upfront and scatter advertisers, including Unilever, are partnering with YouTube in our first year across the NFL's Sunday Ticket in-game advertising opportunity.
Speaker Change: In terms of total expenses the year on year comparisons reflect an additional $1 2 billion and exit charges that we took in the fourth quarter of 2023 and connection with actions to optimize our global office space.
Speaker Change: And you can see in our earnings release. These charges were allocated across the extent signs in other cost of revenues and Opex based on associated head count.
Speaker Change: Operating expenses were 25 billion up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges.
Philipp Schindler: Our subscription offerings are also growing at a healthy clip. YouTube music and premium perform well. Premium users are delivering more value to our partners and YouTube than even ad-supported users do. On average, each additional premium sign-up boosts earnings for creators, music and media partners, and YouTube itself. And we've made premium even more attractive with new features, bundles, and other enhancements. We're also pleased with our first season of NFL Sunday.
Speaker Change: My compensation.
Speaker Change: Operating income was $23 7 billion up 30% and our operating margin was 27%.
Speaker Change: Net income was $20 7 billion and EPS was $1 64.
Speaker Change: We delivered free cash flow of $7 9 billion, which was affected by the timing of the 10.5 billion dollar tax payment. We made on October 16th that we called out previously related to the deferral of certain tax payments to the fourth quarter.
Speaker Change: For the full year 2023 free cash flow was $69 billion, we repurchased a total of 62 billion of our class a and class C shares in 2023 and ended the year with 111 billion in cash and marketable securities.
Philipp Schindler: It gave creators new opportunities to create content and feed user engagement across traditional user content and professional sports content. Feedback on the user experience, including multi-view, has been great. We're excited to continue to innovate here. Responsibility is our fourth pillar, and it underlines everything we do across YouTube. We'll continue to focus relentlessly on this. As always, deepening our relationships with key partners to bring them the best of Google is a key priority for us, and we continue to do this across industries in Q4. We just talked about the NFL.
Speaker Change: Turning to segment results within Google Services revenues were $76 3 billion up 12% Google.
Speaker Change: Google search and other advertising revenues of 48 billion in the corner were up 13% led again by growth in retail.
Speaker Change: Youtube advertising revenues of $9 2 billion were up 16% driven by both direct response and brand advertising.
Philipp Schindler: Sundar mentioned Samsung, among others, earlier. Another highlight was our expanded partnership with Porsche to enhance customers' digital experiences with a deeper in-vehicle integration of Google built-in services, including Google Maps and Play. Whether it's continued collaboration with our partners and key ecosystems or putting Google AI to work for more customers, I'm excited about the opportunities for continued impact in 2024. I'll wrap with a huge note of gratitude to our customers and partners. Our success is only possible because of their success. And then to our Googlers for their outstanding work and focus this year. Ruth, it's over to you.
Speaker Change: Network advertising revenues of $8 3 billion or down 2% subscriptions.
Speaker Change: Subscriptions platforms and devices revenues, which we previously referred to as other revenues were $10 8 billion up 23%, primarily reflecting growth in Youtube subscription revenues.
Speaker Change: TAC was $14 billion up 8% Google.
Speaker Change: Google Services operating income was $26 7 billion up 32% and the operating margin was 35%.
Speaker Change: Turning to the Google Cloud segment revenues were $9 2 billion for the quarter up 26%. We're very pleased with the momentum of G. C. P with an increasing contribution from AI Google.
Ruth Porat: Thank you, Philipp. We are very pleased with our full-year results, with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended the fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year, in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%.
Speaker Change: <unk> workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat.
Speaker Change: Google Cloud delivered operating income of $864 million and an operating margin of 9%.
Speaker Change: As to our other bets for the full year 2023 revenues were $1 5 billion and the operating loss was $4 1 billion.
Speaker Change: <unk> in the fourth quarter benefited from a milestone payment in one of the other bets.
Speaker Change: Turning to our outlook for the business with respect to vehicle services first within advertising. We were pleased with the sequential revenue growth of search and Youtube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive.
Ruth Porat: Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year, as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OPEX based on associated headcount. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by real estate charges, followed by compensation.
Speaker Change: ROI for advertisers.
Speaker Change: As we enter 2024 with advertising revenues of more than 100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base.
Speaker Change: Second within subscriptions platforms and devices.
Speaker Change: Our total revenues from subscription products reached $15 billion for the full year 2023, driven primarily by substantial growth in subscribers for our Youtube subscription offerings. The.
Speaker Change: The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value add offerings and provides a strong base on which to build including through Youtube and newer services like Google One Po.
Speaker Change: <unk> had solid growth again in the fourth quarter, driven primarily by an increase in the number of buyers.
Ruth Porat: Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16th that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow is expected to be $69 billion
Speaker Change: In devices, we continue to make sizable investments with increased emphasis on our pixel family, particularly with AI powered innovation, while driving further efficiencies across the portfolio.
Speaker Change: Turning to Google Cloud, we are pleased with operating performance in the year full year revenues of 33 billion were up 26% versus prior year, ending with strong Q4 performance.
Speaker Change: The cloud team is intensely focused on bringing the benefits of Gemini our industry, leading AI technology to enterprises and governments globally, and we are gratified with the level of engagement the.
Ruth Porat: We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results, within Google services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16%, driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%.
Speaker Change: The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google cloud across every product area.
Speaker Change: In terms of profitability improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability, while we continue to invest to support long term growth.
Speaker Change: Turning to margins and expenses as we have repeatedly stressed we remain committed to our framework to Durably reengineer, our cost base as we invest to support our growth priorities key contributors to moderating our expense growth include first product and process prioritization to ensure we have the right resources.
Ruth Porat: Subscriptions, Platforms, and Devices Revenues, which we previously referred to as Other Revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google services operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment, revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP, with an increasing contribution from AI. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%.
Speaker Change: Behind our most important opportunities and to reallocate resources, where we can.
Speaker Change: Second organizational efficiency and structure, we're focused on removing layers to simplify execution and drive velocity, both product prioritization and the organization design efforts resulted in a slower pace of hiring as you can see with our head count down year on year, reflecting the reduction.
Speaker Change: As we announced in the first quarter of 2023, and a much slower pace of hiring.
Speaker Change: We will continue to invest in top technical and engineering talent.
Speaker Change: Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure streamlining operations across alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimized.
Speaker Change: Our real estate portfolio.
Speaker Change: With respect to Capex, our reported Capex in the fourth quarter was $11 billion driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers.
Ruth Porat: As to our other bets, for the full year 2023, revenues were $1.5 billion, and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the other bets. Turning to our Outlook for the business, with respect to Google services, first within advertising, we were pleased with the sequential revenue growth of search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms, and devices.
Speaker Change: The step up in Capex in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users advertisers developers cloud enterprise customers and governments globally and the long term growth opportunities that offers in 2024, we expect investment in Capex.
Speaker Change: It will be notably larger than in 2023.
Speaker Change: With regard to other bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week alphabets X announced that it would be moving to spin out more projects as independent companies through external capital, giving acts the opportunity to bring.
Ruth Porat: Our total revenues from subscription products reached $15 billion for the full year 2023, driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high-value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter, driven primarily by an increase in the number of buyers.
Speaker Change: More focus to the breakthrough technologies. It is working on to address some of the world's most pressing challenges.
Speaker Change: Thank you Sundar, Philip and I will now take your questions.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone to prevent any background noise. We ask that you. Please mute your line. Once your question has been stated.
Speaker Change: And our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.
Brian Nowak: Great. Thanks for taking my questions I have two.
Ruth Porat: In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly AI-powered innovation, while driving further efficiencies across the portfolio. Turning to Google Cloud, we are pleased with operating performance in the year. Full-year revenues of $33 billion were up 26% versus the prior year, ending with strong Q4 performance.
Brian Nowak: You can fill up.
Brian Nowak: The first one is about sort of a lot of the new generative AI advertising tools. They obviously have a lot of irons in the fire here, even talking about some of the early momentum with tens of thousands of advertisers. The question is can you sort of walk us through some of the hurdles and gating factors that we should be thinking through that dictate the pace.
I wish these tools can really rolled out broadly just so we and advertisers and kind of get an understanding or when they could have a bigger impact on the whole business.
Ruth Porat: The cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses, as we have repeatedly stressed, we remain committed to our framework to durably re-engineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include, first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can. Second, organizational efficiency and structure.
Brian Nowak: And then secondly, how do we think about the long term sales force intensity of the advertising business as you roll more AI based tools like P. Max impacting the overall allocation. Thanks.
Speaker Change: Yeah. Thank you.
Thank you so much so I've covered this a little bit on previous quarters.
Speaker Change: AI has been at the core of our advertising products for a very very long time and.
The recent advances are really allowing us to drive more value for advertisers across a large range of different areas bidding targeting a creative as well as our core advertiser and publisher experiences.
Speaker Change: We are seeing in core search ads for example, the bidding side the value based bidding as a very significant one on the targeting side. The broad match on creative responsive search ads are automatically created.
Ads assets and we're very happy with the progress we're seeing in those areas and I think I mentioned in one of the previous calls.
Ruth Porat: We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and organization design efforts result in a slower pace of hiring, as you can see with our headcount down year on year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other workstreams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our Central Procurement Organization, and optimizing our real estate portfolio with respect to CAPEX. Our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure, with the largest component being servers, followed by data centers.
Speaker Change: One you asked about hurdles and gating factors.
Speaker Change: Essentials play reuse Roland is trying to get everybody ready to really take full advantage of those tools, we talked about the progress on Pemex as well.
Speaker Change: They were very happy with in Q4.
Speaker Change: So overall I think we are on track with what we're expecting here.
Speaker Change: On the sales force.
Speaker Change: Intensity side.
Speaker Change: We have done a few relocations or let me call it portfolio adjustments.
Speaker Change: As you know we have two.
Speaker Change: Large different teams one is our LCR. So large customer solutions team, that's really focused on transformational growth for our largest and most sophisticated customers and we have our.
We call them Gcs global customer solutions team, which is the channel where really every customer starts from some of our largest customers now to all to the millions of smaller ones and smbs.
Speaker Change: The gcs, it's really then scaling growth by dynamically delivering really the right treatment for every customer and important to note is also our fastest growing channel and it delivered particularly strong growth in Q4. So we have done adjustments here to focus more resources on the GTS side.
Ruth Porat: The step up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers, and governments globally, and the long-term growth opportunities that it offers. In 2024, we expect investment in CapEx to be notably larger than in 2023. With regard to other bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp, and I will now take your questions. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone.
Speaker Change: But I also want to be clear when we restructure a theres always an opportunity to be more efficient and smarter in how we service and grow our customers were not restructuring because of the ice taking away rules that's important here.
But we see significant opportunities here with O AI powered solution to actually deliver incredible or ROI at scale and that's why we're doing some of those.
Speaker Change: Adjustments, so I look at sales force intensity as a stronger focus going forward on the channels I mentioned here.
Speaker Change: Great. Thanks Bill.
Speaker Change: Our next question comes from Doug Anmuth with Jpmorgan. Your line is now open.
Douglas Anmuth: Thanks for taking the questions one for Ruth and one for Phil.
Douglas Anmuth: Youre now into year two of Durably reengineering, our cost structure can you just help us assess your progress so far and are there any guideposts that we should be thinking about going forward and then Phil can you talk more about NFL Sunday ticket and just what your key learnings were in year. One how are you thinking about the returns on the investment.
Operator: To prevent any background noise, we ask that you please mute your line once your question has been stated. And our first question comes from Brian Nowak with Morgan Stanley. Your line is now open. Great, thanks for taking my questions. I have two for Philipp.
Douglas Anmuth: On both from an advertising perspective, and then also subscribers about Sunday ticket and Youtube TV.
Speaker Change: Thanks for the question. So we are.
Phil: I'm very pleased with the progress we're continuing to make and we are very committed to the framework to Durably reengineer, our cost base really it's as we're investing to support the growth priorities I tried to call out a number of them in opening comments, but.
Brian Nowak: Philipp, the first one is about sort of a lot of the new generative AI advertising tools. And you obviously have a lot of irons in the fire here, even talking about some of the early momentum with tens of thousands of advertisers. The question is, can you sort of walk us through some of the hurdles and gating factors that we should be thinking through that dictate the pace at which these tools can really be rolled out broadly, just so we and advertisers can get an understanding of when they could have a bigger impact on the whole business? And then, secondly, how do you think about the long-term sales force intensity of the advertising business as you roll out more AI-based tools like PMA Thanks. Yeah, thank you. Thank you so much.
Phil: If you're looking at the work being done across Google across alphabet. It does start with product and process prioritization to make sure. We've got the right resources behind the most important opportunities and then that creates the opportunity for reallocating resources, where we can.
Phil: Then we talked a lot about this quarter about organizational efficiency and structure and we're focused on removing layers to simplify execution and drive.
Phil: Velocity the combination of those two product prioritization and organizational design work has resulted in the slower pace of hiring you can see that in our head count numbers down year on year, you can see it in some of them in the results that we delivered.
Phil: In the fourth quarter, you can and it also goes to the.
Philipp Schindler: So I've covered this a little bit in previous quarters. AI has been at the core of our advertising products for a very, very long time. And the recent advances are really allowing us to drive more value for advertisers across a large range of different areas, bidding, targeting, and creative, as well as our core advertiser and publisher experiences. We are seeing in core search ads, for example, the bidding side, value-based bidding as a very significant one on the targeting side, the broad match on creative, responsive search ads, and automatically created ad assets.
Phil: The announcements around first quarter and much slower pace of hiring.
Phil: At this point in the quarter, we do estimate that severance related expense will be roughly $700 million in the first quarter as we've continue these efforts.
Phil: But as I said in opening comments, we will continue to invest in top engineering. So that's sort of the big one if you start with product prioritization and organizational design, which is why I also made the note about the severance related expense, which.
It helps pave the way as we're continuing to do the work that we're doing but then we have a host of other work streams, which I talked about everything with improving efficiency in our technical infrastructure, which is a very large ongoing effort streamlining operations across alphabet through use of AI. All the work, we're doing with our suppliers and vendors that work, we're doing optimizing our real.
Philipp Schindler: And we're very happy with the progress we're seeing in those areas. I think I mentioned in one of the previous calls that when you ask about hurdles and gating factors, the AI essentials play a huge role in this, trying to get everybody ready to really take full advantage of those tools. We talked about the progress on PMAX as well that we're very happy with, and Q4. So overall, I think we're on track with what we're expecting here. On the Salesforce, intensity side we have done a few reallocations or let me call it portfolio adjustments as you know we have two large different teams one is our LCS a large customer solutions team that's really focused on transformational growth for our largest and most sophisticated customers and we have our we call them GCS global customer solutions team which the channel where really every customer starts from some of our largest customers now to also the millions of smaller ones and SMBs the GCS is really then scaling growth by dynamically delivering really the right treatment for every customer and important notes also our fastest growing channel and it delivered particularly strong growth in Q4 so we have done adjustments here to focus more resources on the GCS side but I also want to be clear when we restructure there's always an opportunity to be more efficient and smarter in how we service and grow our customers we're not restructuring because AI is taking away roles that's important here but we see significant opportunities here with our AI powered solution to actually deliver incredible ROI at scale and that's why we're doing some of those adjustments so I look at Salesforce intensity as a stronger focus going forward on the channels I mentioned here, Great. Thanks, Philip. Our next question comes from Doug Anmuth with J.P. Morgan. Your line is now open. Thanks for taking the questions. One for Ruth and one for Philipp.
Phil: Estate portfolios. So when we've described early reengineering, it's about continuing to build on work that started and that is ongoing.
Phil: So on the NFL Sunday ticket side look as I said earlier NFL Sunday ticket supports our long term strategy and really hope solidified youtube's positioned as a must have askable and everyone's TV said.
Phil: You ask about some of the learnings maybe I'll start with the viewing experience. We received great feedback. So far are people like the navigation multi view the chat the lack of latency.
Phil: We're really really positive feedback on this one.
Phil: You asked about the ads and the subs and maybe I'll start with the subscribers.
Phil: We're pleased with the NFL Sunday ticket sign ups and all first season, both as part of the Youtube TV bundle and as a standalone offering on Youtube Primetime channels remember you can access them via both.
Phil: Nothing more to share on this upside today on this one.
Phil: On the outside as you know advertisers can buy from an NFL lineup as part of our Youtube select our portfolio and this actually allows advertisers to reach football fans across Youtube is pretty unique breadth of NFL content.
Phil: Independently of whether you're doing life NFL games on Youtube TV primetime channels or watching NFL highlights a postgame commentary on Youtube channels, and we saw solid demand across your AD market around our Youtube Sunday ticket offering here. We're excited about the partnership ahead or the partnerships ahead. This is our first season and I mentioned over 90 upfront and scatter advertising.
Phil: Those partner with Youtube and our first year.
Phil: Ross NFL Sunday ticket in game opportunities, which we really appreciate it.
Speaker Change: Thank you both.
Speaker Change: Our next question comes from Eric Sheridan with Goldman Sachs.
Eric Sheridan: Your line is now open.
Eric Sheridan: Thank you for taking the questions two if I could so nor a bigger picture question coming back to your comments earlier in the call on search generated experience. When you think about the evolution of product over the next couple of years, how do you envision a more traditional search and things like the Google Assistant continue to evolve in a world of search generally experience and.
Speaker Change: And what that might mean for elements of commercial and noncommercial search and how use cases might change in the years ahead, and then Ruth I just wanted to make sure we understood some of the messaging from the release and the public comments around one timers in the quarter itself. It seems as if they were not allocated to the segments, but are more elements of other bet.
Ruth: And the alphabet level activities I just wanted to confirm.
Douglas Anmuth: Ruth, you're now into year two of durably reengineering the cost structure. Can you just help us assess your progress so far? And are there any guideposts that we should be thinking about going forward? And then Philipp, can you talk more about NFL Sunday Ticket and just what your key learnings were in year one? How are you thinking about the returns on the investment in both, you know, from an advertising perspective, and then also from subscribers to both Sunday Ticket and YouTube TV? Thanks.
Elements of those one timers were captured in the P&L statement and whether there were also any elements of legal one timers.
Ruth: It would be called out this quarter as well thank you.
Ruth: Sure.
Ruth: Thanks, Eric Great question look it is an exciting time.
Clearly.
Speaker Change: As I said in our sphere, incorporating ESG and the product. The early feedback is positive and we've been at trading on it.
Speaker Change: And it clearly.
Speaker Change: Works for a certain type of queries very well, we are expanding the set of qualities, but it works very well it definitely is answering a certain category of queries.
Ruth Porat: Thanks for the question. We are very pleased with the progress we're continuing to make, and we're very committed to the framework to durably re-engineer our cost base, really as we're investing to support the growth priorities. I tried to call out a number of them in my opening comments, but really, as you're looking at the work being done across Google, across Alphabet, it does start with product and process prioritization to make sure we've got the right resources behind the most important opportunities, and then that creates the opportunity for reallocating resources where we can. Then we talked a lot about this quarter about organizational efficiency and structure, and we're focused on The combination of those two, product prioritization and organizational design work, has resulted in a slower pace of hiring.
Speaker Change: You know of for the first time in a better way so that gives us a direction to proceed as well overall one of the things I think people underestimate about searches.
Speaker Change: The breadth of search the amount of cordis, we seek constantly on our.
Speaker Change: On a new day, which we haven't seen before and so the trick here is to deliver that high quality experience across the breadth of what we see in search.
Speaker Change: And over time, we think assistant will be.
Speaker Change: Very complementary and we will again use our agenda to be out there.
Speaker Change: Particularly with our most advanced models and Bard.
Speaker Change: And allows us to act more like an agent over time, if I were to think about the future and maybe you know go beyond answers in and follow through for users even more so that is the debt actually of what the opportunity set is obviously a lot of execution ahead.
Ruth Porat: You can see that in our headcount numbers down year on year. You can see it in some of the results that we delivered in the fourth quarter. It also goes to the announcements around the first quarter and the much slower pace of hiring. At this point in the quarter, we do estimate that severance-related expenses will be roughly $700 million in the first quarter as we continue these efforts.
Speaker Change: But it's an area, where I think we have a deep sense of what to do and all the work we have taken so far the feedback has been super positive.
Speaker Change: And then in terms of your other question. So on the real estate charge of $1 2 billion in exit charges related to real estate that is in alphabet level activities, but the other comment I was making in opening comments is when you go through the various line items R&D et cetera, you see it.
Ruth Porat: But, as I said in my opening comments, we will continue to invest in top engineering. That's sort of the big one if you start with product prioritization and organizational design, which is why I also made the note about the severance-related expense, which helps pave the way as we continue to do the work that we're doing. But then we have a host of other work streams, which I talked about, everything from improving efficiency in our technical infrastructure, which is a very large ongoing effort, streamlining operations across Alphabet through the use of AI, all the work we're doing with our suppliers and vendors, the work we're doing optimizing our real estate portfolio. So when we've described durably reengineering, it's about continuing to build on work that started and So, on the NFL Sunday Ticket side, as I said earlier, NFL Sunday Ticket supports our long-term strategy and really helps solidify YouTube's position as a must-have app on everyone's TV set.
Speaker Change: Fred there and we have a table in IR can walk everybody through the technicals on that just to understand how it didn't get to read across the various lines in the P&L.
Speaker Change: Our next question comes from Michael Nathanson with Moffett Nathanson. Your line is now open.
Speaker Change: Thanks.
Two for Philip I think given the importance of connected TV engagement Youtube can you talk about the opportunity outside the U S for television and what the company is doing that large to drive more adoption.
Michael Nathanson: Youtube or connected Tvs.
Michael Nathanson: I mean, the Google Opex.
Michael Nathanson: Outside the U S. And then you've been consistent about the strength of shorts over the past year, you talk a bit about the monetization challenges do you still see the headwinds that you saw at the beginning anything you can share about the density of the auction or advertising interest.
Michael Nathanson: Sure so help us with whether or not that's still a headwind to growth. Thanks. So much.
Philipp Schindler: You asked about some of the learnings. Maybe I will start with the viewing experience. We've received great feedback so far. People like the navigation, the multi-view, the chat, the lack of latency, really, really positive feedback on this one. You asked about the ads and the subs. Maybe I will start with the subscribers. We're pleased with the NFL Sunday Ticket sign-ups in our first season, both as part of the YouTube TV bundle and as a stand-alone offering on YouTube prime-time channels.
Michael Nathanson: So much for your question on the connected TV side I mentioned, it actually continues to perform really well.
Michael Nathanson: I've said before you do as the leader in U S streaming watch time, and it's not just one audience group of diving deep it's really all audiences on the international side. It's something we are closely looking at there's nothing specific I have to add at this moment in time.
Philipp Schindler: Remember, you can access them via both. There is nothing more to share on the sub side today on this one. On the ad side, as you know, advertisers can buy from an NFL lineup as part of our YouTube Select portfolio, and this actually allows advertisers to reach football fans across YouTube's pretty unique breadth of NFL content, independently of whether you're watching live NFL games or on YouTube TV or prime-time channels or watching NFL highlights or post-game commentary on YouTube channels.
Michael Nathanson: On this one.
Michael Nathanson: On the shorts monetization side.
Michael Nathanson: We built shorts to respond to the huge demand for both our creators and views for short form video.
Michael Nathanson: And we're very pleased with the growth we've seen and I mentioned 2 billion plus booked in users every month $70 billion in daily views.
Michael Nathanson: Specifically to the monetization question shorts monetization continues to progress nicely.
Michael Nathanson: In fact actually since we introduced our revenue sharing for Schwartz. The total creator earnings generated from shorts have increased every month and we expect this to.
Philipp Schindler: We saw solid demand across the ad market around our YouTube Sunday Ticket offering here. We're excited about the partnership ahead, or the partnerships ahead. This is our first season.
Michael Nathanson: Continue and similar obviously to a long form videos were really committed here to a long term partnership and you heard me say this before Edwin creators succeed.
Eric Sheridan: I mentioned over 90 upfront and scatter advertisers partnered with YouTube in our first year across NFL Sunday Ticket in-game opportunities, which we really appreciate. Thank you both. Our next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.
Michael Nathanson: We succeed.
Speaker Change: Thanks, Paul.
Speaker Change: Our next question comes from Stephen Ju with UBS. Please go your line is now open.
Sundar Pichai: Thank you for taking the questions, too, if I could. Sundar, a bigger picture question coming back to your comments earlier in the call on the search-generated experience. When you think about the evolution of the product over the next couple of years, how do you imagine more traditional search and things like the Google Assistant continue to evolve in a world of search-generated experiences and BARD and what that might mean for elements of commercial and noncommercial search and how use cases might change in the years ahead? And then, Ruth, I just want to make sure we understood some of the messaging from the release and the public comments around one-timers in the quarter It seems as if they were not allocated to the segments but are more elements of other bets and alphabet-level activities.
Stephen Ju: Okay. Thank you so much so fill up this is not a new question, but.
Stephen Ju: It's also been about two years since <unk> was launched but it.
Stephen Ju: It seems like there has been this long lineage of product development and rollout of things like smart bidding in your history, which I believe at the time was designed to help smaller advertisers more easily run search advertising.
And today, you're hoping to generate creative as well as manage my spend to maximize ROI across multiple Google surfaces. So.
Stephen Ju: How are you feeling about enabling smbs, who otherwise could not advertise with you before and what kind of Tam expansion tailwind does that create for your revenue growth over the longer term. Thanks.
Stephen Ju: Look as you know smbs are a huge focus for us.
Stephen Ju: We mentioned this several times before they are they're part of our Gcs channel not only theres more in those but they've been under a ton of change over the last few years and our focus has always been hero and investing in solutions that really help level, the playing field and you mentioned several of those.
Eric Sheridan: I just want to confirm where elements of those one-timers were captured in the P&L statement and whether there were also any elements of legal one-timers that would be called out this quarter as well. Thank you.
Stephen Ju: So actually smbs can compete with bigger brands and more sophisticated.
Advertisers and so the feedback we're always getting as they need easy solutions that drive value quickly and several of the AI part solutions that you are mentioning are actually making the workflow and the whole onramp and.
Sundar Pichai: Look, it is an exciting time. Clearly, as I said, as we are incorporating SGE into the product, the early feedback is positive. And we've been iterating on it, and it clearly works for certain types of queries very well. We're expanding the set of queries where it works very well. It definitely is answering a certain category of queries, you know, for the first time, in a better way. So that gives us direction to proceed as well. Overall, one of the things I think people underestimate about search is, you know, the breadth of search, the amount of queries we see constantly on a new data voucher which we haven't seen before. And so the trick here is to deliver that high-quality experience across the breadth of what we see in search.
Stephen Ju: Bid targeting creative and so on you mentioned that there's so much easier for smbs.
Speaker Change: So we're very satisfied with what we're seeing here, we will continue to invest and I feel AI is really a helpful very interesting future path.
Speaker Change: To make life, not only easier, but also a much more productive and better rois overtime more level playing field for Smbs.
Speaker Change: Right.
Our next question comes from Justin Post with B a ml. Your line is now open.
Justin Post: Great maybe one for Sundar and one for Ruth.
Justin Post: Just on the search growth I think there are some concerns on use of competitive AI tools as an alternative to search just wondering if you've seen any changes in inquiry volumes positive or negative since you've seen.
Ruth Porat: And over time, we think Assistant will be very complementary, and we will again use generative AI there, particularly with our most advanced models in BARD, which allows us to, you know, act more like an agent over time if I were to think about the future, and maybe, you know, go beyond answers and follow through for users even more. So that is the directionally what the opportunity set is, obviously a lot of execution ahead, but it's an area where I think we have a deep sense of what to do, and all the work we have done so far, the feedback has been super positive. And then in terms of your other questions, so on the real estate charge, the $1.2 billion in exit charges related to real estate, that is in alphabet level activities.
Speaker Change: <unk> seen the year evolve and more search generated experiences and what can really make Google stand out versus other AI tools and then route Capex was 11 billion a step up obviously.
The one time items in there or is that how we should think about the new run rate into 24. Thank you.
Speaker Change: Thanks, Justin of first of all look we think about ethics on search obviously more broadly people are a lot of information choices and so.
Speaker Change: And user expectations that are constantly evolving and so we've been doing this for a long time and having what.
Speaker Change: Ends up mattering is a strong <unk>.
Speaker Change: Antinous track record of innovation, obviously generate of AI.
Michael Nathanson: But the other comment I was making in my opening remarks is that when you go through the various line items, R&D, etc., you see it spread out there, and we have a table, and IR can walk anybody through the technicals on that just to understand how it then gets arrayed across the various lines in the P&L. Our next question comes from Michael Nathanson with Muffet Nathanson. Your line is now open. Thanks. I have two for Philip, I think.
Speaker Change: Is it is it is a new tool in the Arsenal, but theres a lot more that goes into search the breadth the depth and the diversity across verticals the ability to follow through getting actually access to rich.
Speaker Change: Diverse sources of content on the web and putting it all together in a compelling way.
And I think through the ear tube and we test, we test search and native experience, particularly.
Speaker Change: Against everything that's out there and you know we can see the progress we are making and how much users are liking the experience better.
Philipp Schindler: Given the importance of Connected TV engagement on YouTube, can you talk about the opportunity outside the U.S. for Connected TV and what the company is doing at large to drive more adoption of YouTube or Connected TVs, you know, given the Google operating system? Anything you can talk about outside the U.S.? And then you've been consistent about the strength of Shorts over the past year. Can you talk a bit about the modernization challenges? Do you still see the headwinds that you saw at the beginning?
Speaker Change: And so I think you know feel very good about the progress.
Speaker Change: And our roadmap for 'twenty four is strong.
Speaker Change: Both on the search and the underlying AI.
AI progress, including the models, so I'm pretty excited about what's ahead of us in 'twenty four.
Philipp Schindler: Anything you'd share about the density of the auction or advertising interest on Shorts? So, help us with whether or not that's still a headwind to growth. Thanks so much.
Speaker Change: And with respect to Capex.
Speaker Change: The Capex of 11 billion in the fourth quarter as indicated was overwhelmingly investment in our technical infrastructure to your question. There was no one time item in there and it really reflects is our outlook for everything Sundar and infill that and I have been talking about the extraordinary applications of AI within Google Deep mine Google services.
Philipp Schindler: Yeah, thank you so much for your question. On the connected TV side, I mentioned it actually continues to perform really well. As I said before, YouTube is the leader in US streaming watch time. And it's not just one audience group diving deep. It's really all audiences.
Speaker Change: Cloud it's across the board for users for advertisers developers cloud enterprise customers governments, and it's really the long term opportunity that offers so last quarter. We didn't know what the Capex would continue to grow in 'twenty 'twenty four we do expect 'twenty 'twenty four full year capex to be notably larger.
Philipp Schindler: On the international side, it's something we are closely looking at. There's nothing specific I have to add at this moment in time on this one. On the Shorts monetization side, look, we built Shorts to respond to the huge demand from both creators and viewers for short-form video. And we're very pleased with the growth we've seen. I mentioned 2 billion plus logged in users every month, and 70 billion in daily views.
Speaker Change: Then 2023 as a note.
Speaker Change: You all know this but the timing of cash payments can affect the quarterly capex number but the main point is we're continuing to invest.
Speaker Change: Our next question comes from Ross Sandler with Barclays. Your line is now open.
Philipp Schindler: Specifically, to the monetization question, Shorts monetization continues to progress nicely. In fact, actually, since we introduced revenue sharing for Shorts, the total creator earnings generated from Shorts have increased every month. And we expect this to continue. And similar, obviously, to our long-form videos, we're really committed here to a long-term partnership. And you heard me say this before, right?
Ross Adam Sandler: Great. Thanks.
Ross Adam Sandler: So I guess a question for.
Ross Adam Sandler: Sundar Philip but.
Ross Adam Sandler: I'll go back to the Doj trial that happened in the fall there was a document that.
Ross Adam Sandler: We've disclosed from.
Ross Adam Sandler: Google.
Ross Adam Sandler: Something along the lines of.
Ross Adam Sandler: While leaning on our quality team to deliver 20% RPM growth and search is a fragile strategy dating back to 2019.
Stephen Ju: When creators succeed, we succeed. Thanks, Phil. Our next question comes from Stephen Ju with UBS. Please go, your line is not open.
Ross Adam Sandler: Businesses.
Ross Adam Sandler: More than doubled since then.
Speaker Change: I guess as we sit here today in early 2024, how do you feel about google's ability to drive search RPM going forward and I guess in the context of what routes.
Philipp Schindler: Okay. Thank you so much. So, Philip, this is not a new question, but it's also been about two years since PMAX was launched. But it seems like there's been this long lineage of product development and rollout of things like smart bidding in your history, which I believe at the time was designed to help smaller advertisers more easily run search advertising. And today, you're helping me generate creatives as well as manage my spend and maximize ROI across multiple Google surfaces. So, how are you feeling about enabling SMBs who could otherwise not advertise with you before? And what kind of TAM expansion tailwind does that create for your revenue growth over the longer term? Thanks.
Speaker Change: Said.
Speaker Change: Tonight about the large revenue base, just how do you feel about the monetization. Thank you.
Speaker Change: Look I think.
Speaker Change: Sure.
Speaker Change: You know I have I have tremendous.
Speaker Change: Confidence in the.
Speaker Change: The quality, driven but our work beats search quality hats quality or improvements on search or improvements on the ads RPM.
Speaker Change: All you know two foundational pillars are extraordinary.
Speaker Change: Extraordinary focus on asset quality, so that would be delivered to the actual ROI to advertisers and improve the experience for users and all underpinned by rigorous technical excellence and go to market excellence right. So the fundamental attributes don't change.
Philipp Schindler: Look, as you know, SMBs are a huge focus for us. We mentioned this several times before; they're part of our GCS channel. Not only is there more to this, but they've been through a ton of change over the last few years. And our focus has always been here on investing in solutions that really help level the playing field. And you mentioned several of those.
Speaker Change: Think AI gives us opportunity both on the organic side as well as on the monetization side and I think we are in the early days of it I think we'll be able to taking a long term view.
Speaker Change: Serve information Nate needs in a deeper way and so I think about it in that with that long term context, and I'm pretty excited about what's ahead.
Philipp Schindler: So actually, SMBs can compete with bigger brands and more sophisticated advertisers. And so the feedback we're always getting is that they need easy solutions that can drive value quickly. And several of the AI-powered solutions that you're mentioning are actually making the workflow and the whole on-ramp and the bid targeting creative and so on. You mentioned that it's so much easier for SMBs.
Speaker Change: And our last question will be from Mark Mahaney with Evercore. Your line is now open.
Mark Mahaney: Okay. Thanks, one question on.
Mark Mahaney: <unk> I had one on cloud on cloud first there's this just this volatility this material deceleration last quarter and the nice Reacceleration. This quarter is that explained by where we are in the optimization cycle and it may be generative AI workloads, starting to trickle in now and cause that growth curve to bend backup any commentary just on the.
Philipp Schindler: So we're very satisfied with what we're seeing here. We will continue to invest. And I feel AI is really a helpful, very interesting future path to make life not only easier, but also much more productive and, over time, a better, more level playing field for SMBs. Thank you. Our next question comes from Justin Post with BAML. Your line is now open. Great. Maybe one for Sundar and one for Ruth.
Speaker Change: Sure the volatility the deceleration in that Reacceleration that we've seen and then Filip I want to ask on them.
Speaker Change: On the creative side, and particularly on Youtube and ads and the creative using AI to improve the creative and really to offer smbs, who have been with Google forever, but offer them now performance based video ad campaigns.
Justin Post: Just on search growth, I think there are some concerns about the use of competitive AI tools as an alternative to search. Just wondering if you've seen any changes in query volumes, positive or negative, since you've seen the year evolve and more search-centered experiences, and what can really make Google stand out versus other AI tools? And then, Ruth, CapEx was $11 billion. A step up, obviously.
Speaker Change: Created by AI is that kind of a new growth area.
Speaker Change: How far along are you in terms of.
Speaker Change: Offering this out into the market and do you think that this opens up a new area of spend that wasn't there before thank you.
Speaker Change: Thanks, Marc on cloud, let me take that in a festival.
Speaker Change:
Speaker Change: A combination of factors I think are I think definitely.
Speaker Change: Excitement around.
Speaker Change: The AI solutions on top of our foundational pillar be data analytics infrastructure security et cetera, but AI is definitely something which is which is driving interest and early adoption in U.
Sundar Pichai: Any one-time items in there, or is that how we should think about the new run rate in 2024? Thank you. Thanks, Justin.
Speaker Change: As you saw that greater than 70% of jenney, a unicorn started using Google.
Sundar Pichai: First of all, look, we think about effects on search, you know, obviously more broadly. People have a lot of information choices. And so, user expectations are constantly evolving. And so we've been doing this for a long time.
Speaker Change: Google Cloud and so I think it's an area, where our strengths will continue to play out as we go through 'twenty four, especially when I look at the innovation ahead from us on the AI front.
Speaker Change: And second I think you.
Speaker Change: There are regional variations, but the cost optimizations in many parts are are something we have mostly worked through and I think that was a contributing.
Sundar Pichai: And I think what Ends Up Mattering is a strong, continuous track record of innovation. Obviously, generative AI is a new tool in the arsenal, but there's a lot more that goes into search, the breadth, the depth, the diversity across verticals, the ability to follow through, getting access to rich data, diverse sources of content on the web and putting it all together in a compelling way. And I think through the year, too, when we test, we test search and rate of experience, particularly against everything that's out there.
Speaker Change: Factor as well.
Speaker Change: So on your Youtube question, maybe let me start with a general view Youtube submission you know has enabled millions of creators around the world to share their voice and connect with audiences and obviously build thriving businesses here and AI has been a very critical piece of this already.
Speaker Change: Obviously aware of the made on Youtube announcement, where we introduce a whole lot of a new complementary creativity features on Youtube, including Dream screen for example.
Sundar Pichai: And, you know, we can see the progress we are making and how much users are liking the experience better. And so I think, you know, I feel very good about the progress, and our roadmap for 24 is strong, both on the search and underlying AI progress, including the model. So I'm pretty excited about what's ahead of us in 24. And with respect to CapEx, the CapEx of $11 billion in the fourth quarter, as indicated, was an overwhelmingly investment in our technical infrastructure. To answer your question, there was no one-time item in there.
And a lot of other really interesting tools and thoughts you can obviously imagine that we can take this more actively to the advertising world already as you know.
Speaker Change: Continues already to power AI, a lot of our video AD solutions and measurement capabilities. It's part of our video reach campaigns multi format ads are actually there is.
Speaker Change: Generated greater music.
Speaker Change: That actually makes it easier for creators to design the perfect soundtrack.
Ruth Porat: It really reflects our outlook for everything, Sundar and Philip, and I've been talking about the extraordinary applications of AI within Google DeepMind, Google Services, Google Cloud. It's across the board for users, for advertisers, developers, cloud enterprise customers, governments, and it's really the long-term opportunity that AI offers. So last quarter, we did note that CapEx would continue to grow in 2024. We do expect 2024 full-year CapEx to be notably larger than 2023.
Speaker Change: Already and as I said earlier AI will unlock a new world of creativity and you can see how this will if you just look at where models are heading where multimodal models are hitting where the generation capabilities of those models are heading you can absolutely see how this will impact and positively impact and simplify the floor for Cree.
Speaker Change: <unk> similar to what you see already emerging in some of our core products like HCA on the search side.
Speaker Change: Thank you.
Speaker Change: Thank you and that concludes our question and answer session for today I'd like to turn the conference back over to Jim Friedland for any further remarks.
Ruth Porat: As a note, I think you all know this, but the timing of cash payments can affect the quarterly CapEx number, but the main point is we're continuing to invest. Our next question comes from Ross Sandler with Barclays. Your line is now open. Great, thanks.
Jim Friedland: Thanks, everyone for joining us today, we look forward to speaking with you again on our first quarter 2024 call. Thank you and have a good evening.
Ross Adam Sandler: So I guess the question for you is, I don't know if it's Sundar or Philipp, but if we go back to the DOJ trial that happened in the fall, there was a document that was disclosed from Google that said something along the lines of why leaning on an ad quality team to deliver 20% RPM growth in search is a fragile strategy. You know, dating back to 2019, your business has, I think, more than doubled since then. So I guess as we sit here today in early 2024, how do you feel about Google's ability to drive search RPM going forward? And I guess in the context of what Ruth said.
Speaker Change: Thank you everyone. This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Yeah.
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Speaker Change: [music].
Sundar Pichai: Tonight, about the large revenue base, just how do you feel about monetization? Thank you. Look, I think, um... You know, I have tremendous confidence in the quality-driven, both, you know, our work, be it search quality, ads quality, our improvements in search, our improvements in ads RPM, all, you know, two foundational pillars are, you know, extraordinary focus on ads quality so that we deliver the actual ROI to advertisers and improve the experience for users, all underpinned by rigor and technical excellence and go-to- So the fundamental attributes don't change.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Okay.
Sundar Pichai: I think AI gives us opportunities both on the organic side as well as on the monetization side. And I think we are in the early days of that. I think we'll be able to, taking a long-term view, serve information needs in a deeper way. And, you know, so I think about it in that long-term context, and I'm pretty excited about what's ahead. And our last question will be from Mark Mahaney with Evercore. Your line is now open.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Mark Mahaney: Okay, thanks. One question on YouTube AI and one on the cloud. On cloud first, there's just this volatility, this material deceleration last quarter and then a nice re-acceleration this quarter. Is that explained by where we are in the optimization cycle, and it may be generative AI workloads starting to trickle in now and cause that growth curve to bend back up? Any commentary just on the sort of volatility, the deceleration, and the re-acceleration that we've seen? And then Philipp, I want to ask about the creative side and, particularly, YouTube and ads and using AI to improve the creative and really to offer SMBs who have been with Google forever but now offer them performance-based video ad campaigns created by AI. Is that kind of a new growth area?
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: Yes.
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Sundar Pichai: How far along are you in terms of offering this to the market? And do you think that this opens up a new area of spend that wasn't there before? Thank you. Thanks, Mark. On cloud, let me take that, you know, first of all, I think, I definitely think, excitement around the AI solutions on top of our foundational pillars, be data analytics, infrastructure, security, etc., but AI is definitely something that is driving interest and early adoption. And, you know, as you know, you saw that greater than 70% of Gen AI unicorns are using Google Cloud. And so I think it's an area where our strengths will continue to play out as we go through 24, especially when I look at the innovation ahead from us on the AI front. And second, I think, you know, there are regional variations, but you know, the cost optimizations in many parts are something we have mostly worked through. And I think that was a contributing factor as well.
Speaker Change: Yeah.
Speaker Change: Okay.
Sundar Pichai: So on your YouTube question, maybe let me start with a general view. YouTube's mission, you know, has enabled millions of creators around the world to share their voices and connect with audiences and, obviously, build thriving businesses here. And AI has been a very critical piece of this already. You are obviously aware of the YouTube announcement where we introduced a whole lot of new complementary creativity features on YouTube, including DreamScreen, for example, and a lot of other really interesting tools and thoughts. You can obviously imagine that we can take this more actively to the advertising world already. As you know, it continues to power AI, a lot of our video ad solutions, and measurement capabilities. It's part of video reach campaigns, or multi-format ads.
Philipp Schindler: Actually, there's generative creator music that actually makes it easier for creators to design the perfect soundtrack already. And, as I said earlier, AI will unlock a new world of creativity. And you can see how this will, if you just look at where models are heading, where multimodal models are heading, where the generation capabilities of those models are heading, you can absolutely see how this will impact and positively impact and simplify the flow for creators, similar to what you see already emerging in some of our core products like ACA on the search site.
Philipp Schindler: Thank you. Thank you, and that concludes our question and answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks. Thank you, everyone, for joining us today. We look forward to speaking with you again on our first quarter 2024 call. Thank you, and have a good evening. Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.