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Alphabet looks beyond Google ads for revenue

Alphabet, the parent company of search giant Google, is getting proactive in looking for income opportunities outside of internet advertising.

In its Q1 earnings report, non-advertising revenue showed growth of 4.9%. The verticals categorised under Other Revenue, which include the Pixel smartphone, cloud services and the Google Play store, are now worth $3.1 billion.

“Our excellent results represent a terrific start to 2017, with revenues up 22% versus the first quarter of 2016 and 24% on a constant currency basis,” says Alphabet CFO, Ruth Porat. “We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet.”

Along with Facebook, Google is the dominant player in online advertising. And according to ARK Investment Management analyst James Wang, Google is “doing a much better job in diversifying revenue than Facebook is.” He also praises the “sustained momentum” of the Pixel, arguably the first Android device to give users an iPhone-like experience, and one of the jewels in Google’s growing hardware crown.

Alphabet’s on-going diversification drive also encompasses ‘Other Bets’, the innovation business often referred to as the company’s loss-maker. Nest, Waymo and Google Fiber all originated under ‘Other Bets’. This division posted a loss of $855 million in the first quarter.

While Google advertising remains the parent company’s primary source of income (making up 86% of revenues), exploring these different categories will help reduce Alphabet’s dependency on a single stream. Not that the bottom line is in immediate danger; Reuters reports that the company as a whole has grown 22% to $24.7 billion in the last year, with share prices reaching a record high of $932.73.

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