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Despite challenges to the hard hit travel industry, Google’s advertising business soared nonetheless in the fourth quarter because of strength in retail, tech media, and cloud services.
Google’s advertising revenue, which pre-pandemic in 2017 generated about a 12 percent chunk from travel, according to Skift Research, grew 21.7 percent to $46.2 billion in the fourth quarter compared with the same period a year earlier. Parent company Alphabet’s operating margin was 28 percent.
Philipp Schindler, Alphabet’s chief business officer, said during the company’s fourth quarter and full-year 2020 earnings call Tuesday that Google’s advertising base, particularly among small businesses, expanded in the quarter. He pointed to Google’s efforts to help small business advertisers take advantage of shifts in supply and demand even within sectors such as travel.
Vacation Rental Advertising
“For example, travel continues to get hit hard, hit pretty hard,” Schindler said. “And after the initial lockdown last year, searches for vacation homes and near-me rentals saw huge spikes, and that continues to fluctuate.”
After all, vacation rentals have been a clear winner during the pandemic recovery as domestic travel around the world soared, and people sought trips and vacations to drive locations within a few hours of home.
Lufthansa Using Google’s Data Services
In other travel-related news, Schindler cited Lufthansa as an example of the way businesses are changing the way they operate because of the increased shift to digital and changing consumer behavior.
“Like many airlines, they needed more insight on where to fly, at what capacity and how often as travel started to open up last year,” Schindler said, referring to the German airline. “Over the summer, we built a product called Flight Demand Explorer, which gave real-time answers to these questions, helping them find demand and ramp up.”
Google began providing data to Lufthansa, Air France and other airlines last year in a bid to expand its business-to-business services to the aviation industry — and Schindler was hyping the new product, Flight Demand Explorer.
“Within 2 months, they [Lufthansa] tripled destination routes and got more than 80 planes back in the air, with many flights fully sold out within days,” Schindler said.
Of course, Google can’t really take full credit for Lufthansa tripling its routes, and it remains to be seen just how much demand there is for Google’s Flight Demand Explorer within the airline industry.
Google Maps the Would-Be Superapp
During the fourth quarter, according to Alphabet CEO Sundar Pichai, Google added a “community feed” to the Explore tab in Google Maps so that if you book a food delivery through Google Maps you can track takeout and delivery status.
That new feature is in keeping with Google’s longstanding effort to make Google Maps use’ pervasive.
YouTube for Brand Advertisers
Despite all the problems that YouTube has in terms of the spread of disinformation, it is a success story for Alphabet in terms of attracting brand advertising revenue. YouTube ad revenue in the fourth quarter increased 46 percent to $6.88 billion, and made up 15 percent of Google’s total advertising revenue during the fourth quarter.
“YouTube continues, in our view, to be amazing for brand advertisers as well,” Schindler said. “Our brand business was hit hard in the early stages of the pandemic, rebounded in Q3 and into Q4. And it really helps advertisers reach younger audiences. They can reach anywhere. We now reach more 18- to 49-year-olds than all linear TV networks combined. Watch time is increasing. Advertiser effectiveness is getting better and better. And so this is a very nice development on the subscription strategy.”
Alphabet’s net income in the fourth quarter rose 70 percent to $15.2 billion.