The size and scale of YouTube ⁠— a fifth of Facebook, a tenth of Google, and 9 times the acquisition price

• Google has revealed the revenue for YouTube and Cloud businesses for the first time.
• YouTube generated $15.15 billion in revenue last year, out of which $4.72 billion was generated in the last quarter.
• YouTube Premium now has over 20 million subscribers.

For the very first time, Google’s parent Alphabet revealed the revenues of cloud business and YouTube. While the company remained pleased with the numbers, it sent the investors into a tizzy as its stock fell by 4% soon after.

YouTube’s ad business is roughly a fifth of Facebook’s ad revenues. However, it is six times more that of Amazon-owned Twitch’s ad revenue. That is not all. YouTube shares some of its revenues with content creators - and the company has chosen to keep that under wraps. Google’s CFO Ruth Porat on a call with analysts did not reveal the exact percentage.

At the outset, YouTube’s revenue is at least 9 times of its acquisition price of $1.65 billion in 2006. Also, Google said that YouTube contributed 10% to Google’s total revenue. As much as $4.7 billion of this came in the fourth quarter itself.


Source: Alphabet and Facebook earnings reports

“I'm really pleased with our continued progress in Search and in building two of our newer growth areas - YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate,” said Sundar Pichai, CEO of Alphabet who took over from Larry Page and Sergey Brin two months ago.

The steaming service provider’s revenue has also been growing. Its annual revenue grew from $11.2 billion in 2018 to $15.15 billion -- which is a 36.5% jump. But investors who might have had great expectations from the unreported revenues might have been unhappy about how it compared to Mark Zuckerberg’s listed social media giant.

The opaqueness of YouTube

Investors and stock watchers were also eager to see how YouTube Premium measures with Netflix and other streaming services. It has been a late entrant into the business which is already crowded with players like Apple and Amazon. But that data was not forthcoming from the company.

Google said that YouTube Premium, its ad-free service, has over 20 million subscribers. Its paid TV service also has over 2 million subscribers. However, revenue from these services are clubbed in the ‘other’ category which includes revenue from Pixel and Google Home devices. The opaqueness of these revelations must have turned investors cautious of their outlook.

Google Cloud clocks 35% growth year-over-year

Google Cloud, the company’s cloud-computing unit reported a revenue of $2.6 billion for the fourth quarter. This is $1.7 billion higher than the same period in the corresponding quarter translating to a growth of about 35%.

Yet, it is merely a fraction of the cloud business that other top tech companies generate.


Source: Alphabet, Amazon and Microsoft Q4 2019 earnings reports

Thomas Kurian took over the company’s cloud business after Diane Greene stepped down last year.

See also:

YouTube brought in $15 billion in advertising revenue in 2019 - 9 times more than Google paid to acquire the site 14 years ago

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