Alphabet operates a variety of businesses. Google is the main business area. Since it occupies a huge proportion compared to other business areas, we will divide it into Google and other businesses.
Google consists of Android, Chrome, Hardware, Google Cloud, Google Maps, Google Play, Search and YouTube. Each one is a business that is deeply related to our lives. All of Alphabet's technology infrastructure is included with Google. Google earns revenue from app sales, app purchases, digital content, and service charges such as hardware and music listening, and subscription costs such as Google Cloud.
Other business fields are a combination of various business fields. It consists of Access, Calico, CapitalG, GV, Verily, Waymo, and X. In this business area, revenue is generated through licensing and R&D service provision through Verily.
As you can see, more than 99% of sales come from the Google business. Ad revenue from Google and YouTube services accounts for about 84%. Cloud business and app service business account for other parts.
Google advertising revenue is affected by COVID-19 and other factors. Ad competition in keyword search, ad quality and form, delivery, and policy changes. In addition, sales fluctuate depending on exchange rates, advertiser's advertising contract costs, general economic conditions, and traffic growth rates in emerging countries.
Looking at ad sales in more detail, as mentioned earlier, most of the ads are in the Google business.
Occurs from Google search engines, various Google services, YouTube and Google network membership. Google services refer to Gmail, Google Maps, and Google Play. Google Network membership generates revenue from using AdMob, Adsense, and Google Ad Manger.
Google search engines and services
Revenue in this business segment declined by $368million on a half-year basis from the same period of the previous year due to COVID-19. Although the volume of search on desktop and mobile has increased, the volume of non-commercial searches has increased, and the amount paid by advertisers has decreased, leading to a decrease in sales. In the second quarter of the year, advertising payments by advertisers increased as search volumes for commercial topics increased.
YouTube advertisement
YouTube ads increased by $1,222 million on a half-year basis compared to the same period last year. Sales increased as a result of increased direct purchases of advertising products. As a result of COVID-19, advertisers' advertising payments decreased, which in part reduced their sales growth.
Google Network Membership
Sales in this business segment decreased by $305 million on a half-year basis compared to the same period last year. Revenue declined as advertisers paid less on Google Ad Manger and AdSense. This decrease in sales was partially offset by the increase in sales from AdMob.
The number of clicks on the ad itself has increased, but the payout per click has decreased as you can see. As a result of this, advertising sales decreased.
Sales in business units other than the Google Advertising business unit increased.
Google cloud segment
The other segment
The following is the percentage of sales by region.
EMEA refers to Europe and Middle East Africa. APAC refers to all Asian countries including Australia. The United States has the highest share of sales at 47%.
The numbers on the left are Alphabet and the numbers on the right are industry averages. Our ROE is maintained at around 16% and is somewhat lower than the industry average. The average 5-year EPS growth rate is 19.92%. It appears to have been slightly lowered due to a decline in net profit from COVID-19 this year. Looking at the Quick Ratio, it has an excellent short-term debt repayment ability at 3.4. LT Debt to Equity is 1.94%, which is a level with no long-term debt. The financial strength is very good. The asset turnover ratio is 0.62, which is a number that exceeds our assets for 2 years sales. Dividends are not paid. With a high ROI of about 14%, it is advantageous for shareholders to reinvest our profits in the business.
Google is the world's largest IT company and has strong brand awareness and market share. The future business growth is also expected.
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