Mobile search, YouTube and programmatic advertising powered Google’s revenue in Q4 2015, while parent Alphabet revealed how much revenue (and loss) comes from Other Bets, its so-called moonshot activities.
Google, which includes the search and ad business as well as related activities such as Play, hardware, cloud and apps, and newer efforts such as machine learning and virtual reality, saw an 18 per cent increase in revenue to $21.2 billion in the three months to end December. Operating income of $6.77 billion was up 29.7 per cent.
Other Bets made a Q4 operating loss of $1.2 billion, almost doubled year-on-year from $634 million, on revenue of $151 million, up 42.5 per cent.
For the full year, Google revenue of $74.5 billion was up 13.5 per cent. Operating income was $23.4 billion, up 23.3 per cent.
Other Bets made an operating loss of $3.6 billion in 2015, a widening from $1.9 billion the previous year. 2015 revenue was $448 million, up from $327 million in 2014.
This was the company’s second results announcement under a dual-structure, intended to give investors greater insight into its long-term investments.
Most of the revenue for Other Bets came from three sources, CFO Ruth Porat (pictured) said on the investor call: Fiber, Nest and Verily (previously known as Google Life Sciences). Its other activities, such as self-driving cars and Project Loon, generate less revenue, although hold a great profile.
Capex for Other Bets jumped for 2015 to $869 million from $501 million, a majority going into its Fiber business which aims to dig up streets and lay fibre-optic cabling in additional US cities during 2016, an old-fashioned telco way of spending cash.
However, it is interesting to note that the moonshot business, despite its reputation, carries significantly lower investment than Google itself, which had Q4 capex of $1.78 billion (full year: $8.85 billion). Much of this amount is investment in data centres that underpin its business.
Porat argued Google is also innovative: “Notably, in many ways, some of Alphabet’s biggest moonshots are in Google itself, from driving the next wave of computing through machine learning, capitalising on the shift to the cloud by enterprises, building platforms like virtual reality and pursuing the opportunities we see with the next billion users in emerging markets, you should expect Google to continue to invest in efforts to improve life for billions of people,” she said.
Overall, parent Alphabet reported an 18 per cent increase in Q4 2015 revenue to $21.33 billion with net income that increased 5 per cent to $4.92 billion.
Sales, excluding the costs of acquiring ad traffic, jumped to $17.3 billion in the quarter from $14.5 billion on the same basis.