Is Alphabet Relying More on Advertising Budgets?

Neha Gupta - Author

Nov. 14 2017, Updated 9:00 a.m. ET

Advertising supplied 86.7% of revenues

Alphabet’s (GOOGL) investment in futuristic initiatives such as driverless vehicles and balloon-based Internet have largely been viewed as part of the company’s efforts to diversify its revenue streams beyond advertising, which remains its bread and butter.

The company generated 86.7% of its revenues in 3Q17 from advertising. In 2Q17, 87.2% of Alphabet’s revenues came from advertising, compared with 86.5% of revenue coming from advertising in 1Q17, 85.9% of revenue coming from advertising in 4Q16, and 88.3% of revenue coming from advertising in 88.3%.

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Alphabet’s reliance on ad sales reduced in 3Q17

Alphabet relied less on advertising sales for its revenues in 3Q17 than it did in the prior quarter and in 3Q16.

Facebook (FB), on its part, generated 98.2% of its revenues in 3Q17 from advertising. The company looked to advertising for 98.9% of its revenues in 2Q17.

Twitter (TWTR) obtained 85.3% of its revenues in 3Q17 from advertising, compared with 85.2% of revenues from advertising in 2Q17. Yelp (YELP) relied on advertising for 89.7% of its revenues in 3Q17, compared with 89.3% of revenues from advertising in 2Q17.

Fierce contest for online advertising budgets

Although Alphabet, Facebook, Twitter, Yelp, and Snap (SNAP) are traditionally ad-funded businesses, their reliance on advertising has come into sharp focus in recent times amid increasing competition for online advertising dollars. Companies like Amazon.com (AMZN) and Verizon Communications (VZ), which do not traditionally rely on advertising for the bulk of their revenues, have stepped up their campaigns for more share of online advertising market as they seek new growth opportunities.

Matters have not been made better for online advertising incumbents by the fact that the relatively low barriers to entry into online advertising industry continue to draw more players into the industry, further increasing competition. With such competition, it’s been necessary for Alphabet, Facebook, and Twitter to try to diversify beyond advertising to secure their futures.


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