The rebounding online ad economy just pushed Facebook and Google to new heights
The pandemic? The antitrust threats from government regulators? None of those seem to be fazing Big Tech right now, with the world’s five biggest tech companies — Apple, Microsoft, Amazon, Google and Facebook — reporting huge spring quarters over the last week. In total, those five companies reported a staggering $331.5 billion in sales between April and June. (The five goliaths nearly matched the record $364.9 billion in revenue posted in the holiday-stacked Q4 of 2020.)
To help put that in perspective, that revenue total is equivalent to the annual gross domestic product of countries like Ireland and Denmark. It’s not an exact comparison, but the point remains: Big Tech’s remarkable growth during the pandemic continued to chug along in Q2 of 2021.
The chart below gives a look at each company’s total quarterly revenue, as well as each company’s year-over-year revenue growth.
Let’s break down what happened. Apple and Microsoft — the only two companies in the world with a market cap north of $2 trillion — reported more of the same during the spring quarter. Apple posted another quarter of record-setting revenue, with iPhone sales accounting for about half of its $81.4 billion in sales. And Microsoft beat Wall Street’s revenue and earnings expectations, thanks in large part to its cloud business revenue growing 30% year-over-year to $17.4 billion.
Amazon, meanwhile, was the black sheep of the bunch during Jeff Bezos’ final quarter in charge. The Seattle company reported revenue of $113 billion — its third straight quarter bringing in more than $100 billion — but that was $2 billion shy of what analysts anticipated. But if anything, Amazon’s performance is a sign of the times: You know it’s a bull market for Big Tech when companies can report 12-figure sales and it’s considered a mediocre quarter.
The tech standouts for the quarter, though, were Google parent company Alphabet and Facebook. The Silicon Valley neighbors’ dominance over digital advertising was reinforced this week, with Google’s parent reporting a company-record $61.9 billion in revenue; ad sales, which make up the bulk of Google’s revenue, were up 69% compared to last year. Facebook wasn’t far off, reporting 56% year-over-year revenue growth — the social network’s best growth rate in five years.
Companies worth more than $1 trillion typically don’t report such massive sales growth. But these aren’t normal times, and Google and Facebook have been in good position to capitalize. When COVID-19 lockdowns went into effect last year, billions of people were left with little else to do but surf Google-owned YouTube or scan Facebook and Instagram from their couches. (Facebook’s network of apps, which includes Instagram and WhatsApp, had 2.76 billion daily users by the end of June.)
Google and Facebook’s huge audiences paid off in Q2, as advertisers turned to both companies when pandemic restrictions started to ease this spring. YouTube is a good example here, with the video site reporting 84% year-over-year sales growth while chipping in $7 billion to the company’s overall revenue.
And Google’s push to monetize YouTube may only be underway, with CEO Sundar Pichai saying this week there’s “a lot of headroom for e-commerce” growth on the site. Google’s Chief Business Officer Philipp Schindler echoed his boss, saying on the company’s earnings call that “during the pandemic, we’ve seen more consumers use YouTube to discover and shop.”
YouTube’s performance had Wall Street analysts buzzing afterwards, with Needham analyst Laura Martin saying in a note to clients YouTube “would add 45% to [Google’s] share price if separately traded.”
In other words: YouTube is worth at least $800 million on its own.
Separating YouTube from the rest of Google isn’t that far fetched, either, considering that parent company Alphabet is currently facing several antitrust lawsuits, including one from the U.S. Justice Department. And Facebook faces its own regulatory threats, with the F.T.C. gearing up to file an amended antitrust lawsuit against Mark Zuckerberg & Co. after its initial lawsuit was thrown out last month. But so far, analysts aren’t worried about these lawsuits — especially as long as Google and Facebook continue to be the go-to spot for advertisers online.
“Despite some expected headwinds this year, including growing antitrust battles, we anticipate Facebook will benefit from improved ad spending and capitalize on accelerated digital transformation with new initiatives,” Brian White, an analyst with Monness Crespi Hardt, said in a note to clients.
It’s worth noting other major tech companies benefited from the digital ad rebound as well. Twitter’s ad sales were up 87% compared to a year ago, and Snap’s revenue more than doubled.
From a macro standpoint, it can’t be any clearer at this point: The pandemic was a win-win for Big Tech. The early stages of the pandemic funneled more people to their platforms and products, further solidifying their dominance. And now those companies are benefiting, either by having users load up on their devices or by having advertisers depend on their platforms to reach consumers.
Combined, the five tech giants have added $4.5 trillion to their market caps since April 2020. The pandemic and threats of antitrust crackdowns haven’t curbed Big Tech’s power one bit, and the latest batch of quarterly reports only helped drive that point home.
Tech reporter • email@example.com • @SeanB44