Google Segment Revenues 2016

Google Segment generates revenue primarily by selling online advertising over Google owned and operated properties and over Google Network member’ websites.

Google properties revenues consist primarily of advertising revenue that is generated on:

  • Google search properties. This includes revenue from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.;
  • Other Google owned and operated properties like Gmail, Maps, and Google Play; and
  • YouTube, including but not limited to, YouTube TrueView and Google Preferred.
source: fortune.com

Google Network Members’ properties revenues consist primarily of advertising revenues generated from ads placed on Google Network Member properties through:

  • AdSense (such as AdSense for Search, AdSense for Content, etc.);
  • AdMob; and
  • DoubleClick AdExchange.

Google Segment also earns revenue from sources other than advertising. Other revenues consist primarily of revenues and sales from:

  • Apps, in-app purchases, and digital content in the Google Play store;
  • Hardware;
  • Licensing-related revenue; and
  • Service fees received for Google Cloud offerings.

Of the Google Segment total revenues of $89.5 billion in 2016, Google Segment generated:

  • $79.4 billion, 88.7% of the Google Segment total revenues, from advertising; and
  • $10.1 billion, 11.3% of the Google Segment total revenues, from Other.

Of the total advertising revenue $79.4 billion in 2016, Google Segment generated:

  • $63.8 billion, 71.3% of the Google Segment total revenues, from Google Properties; and
  • $15.6 billion, 17.4% of the Google Segment total revenues, from Google Network Members’ Properties.

Alphabet Geographic Segments Revenue 2016

Of the $90.3 billion of total revenues in 2016, Alphabet generated:

  • $42.8 billion, 47.4% of the total, from the United States;
  • $7.8 billion, 8.6% of the total, from the United Kingdom; and
  • $39.7 billion, 44.0% of the total, from Rest of the World.

Amazon vs Google – Who will be the winner?

At present, Apple is the most valuable company in the world. Google, Microsoft, and Amazon hold the second, third, and fourth positions respectively. Between Amazon and Google, who has a better chance of winning the race to become the most valuable company?

If we look at the overall revenue and revenue growth, Amazon is winning. But, if we look the overall net profits and net profit margins, Alphabet is winning.

Let us get into details. Alphabet currently earns 99% of its revenues from Google segment. Google segment further earns 89% of its revenues from advertising and rest of 11% from sales of digital content, apps and cloud offerings, and sales of hardware products. Google segment is highly profitable right now and Other Bets is losing more money than what it makes. Will Other Bets become profitable in future? Probably yes.

source: islabit.com

Amazon earns 89% from retail sales and services, 9% from AWS, and 2% from others. Amazon is investing in International expansion. So, International segment operating margins are negative. US segment operating margins are in lower single digits. AWS is generating good operating profits, but contributes little to the overall revenues.

In the future, can Google beat Amazon in revenues? Probably yes. This is because Google is not much behind Amazon in revenue growth. Higher revenue growth in future will translate into higher revenues and hence more profits.

In the future, can Amazon beat Google in profits? Probably no. This is because of the cost structure of Amazon. Google has much lesser operating costs than Amazon. That translates into higher operating profits and net profits.   

So, as per our analysis and understanding, Google will be the winner.

What are we missing?