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YouTube brings in $5 billion in ad revenue as Alphabet and Google bounce back

Parent company Alphabet reported better-than-expected third quarter ad revenue results

Illustration by Alex Castro / The Verge

Google parent company Alphabet’s third quarter revenue increased 14 percent from the year before, led by a rebound in advertising revenue for both Google and YouTube. YouTube brought in $5 billion in advertising revenue in the third quarter of 2020 — a sign that advertisers who pulled back on their spending because of the coronavirus earlier in the year may be returning to something resembling normal.

YouTube now has more than 30 million music and premium paid subscribers — 35 million, including free trials — and YouTube TV has more than 3 million subscribers. That’s especially strong, since YouTube TV announced a monthly price increase from $50 to $64.99 in June. And in what may be a sign of the times, views for guided meditation videos on YouTube were up 40 percent since March, and DIY face mask tutorials have been viewed over 1 billion times, Google CEO Sundar Pichai said on a call with investors to discuss the earnings results.

“We’re pleased at the degree to which advertisers really reactivated their budgets in the third quarter,” said Ruth Porat, CFO of Alphabet and Google, on a call with investors. She added that it was evidence that consumers are showing strong demand across nearly all verticals. “YouTube’s strong watch time growth enables advertisers to reach audiences they can’t reach on TV.” The company had made investments in content moderation to ensure both creators and users on YouTube have a positive experience, Porat said.

Google’s advertising division brought in revenue of $37.1 billion, an increase from $34 billion last year. YouTube ads revenue increased 30 percent from $3.8 billion in the third quarter of 2019.

“This year, including this quarter, showed how valuable Google’s founding product — search — has been to people,” Pichai said on the call.

This quarter was a sharp contrast to the disappointing second quarter of 2020, where Google’s revenue declined for the first time ever. This quarter, Google returned to growth, with revenue of $46.2 billion in the third quarter, up from $40 billion a year ago, and net income of $11.24 billion, up from $7.06 billion last year.

Google’s “other” department, which includes hardware, cloud services, and the Play Store, had revenue of $5.4 billion, up from $4 billion. Its “other bets” segment — which includes Waymo and Verily— had revenue of $178 million, but remained money-losers for the company, to the tune of $1.1 billion. That’s worse than this time last year.

Google’s Cloud division had revenue of $3.44 billion, up from $2.3 billion a year ago, and its Search segment had revenue of $26.3 billion, up from $24.7 billion. Pichai said customers are increasingly moving to the cloud, “to drive efficiency and lower IT costs,” adding that the future of work is creating “significant growth in demand” for Google’s cloud products. He added that next quarter, Google will break out its cloud division as a separate reporting segment.

The company’s videoconferencing platform Google Meet had 235 million daily meetings and more than 7.5 billion daily video calls, Pichai said.

Pichai also said the company was prepared for a lawsuit filed last week by the Department of Justice, which alleges the internet giant has an illegal monopoly on search and advertising markets. “We believe that our products are creating significant benefits and we’ll confidently make our case,” he said. “Our company’s focus remains on continuing our work to build a search product that people love and value.”

Update October 29th 6:09PM ET: Added details from Alphabet’s call with investors