How much revenue came from advertising?
Alphabet’s (GOOG) revenue rose at a three-year CAGR (compound annual growth rate) of 19% to $110.9 billion in 2017. Its revenue rose 14% in 2015 compared to 23% in 2017. Google produced more than 99% of this revenue.
The Google segment generates advertising revenues from Google.com, Google apps, and YouTube. The combined revenue contribution of these Google properties increased from 68.6% in 2014 to 70.9% in 2017. Alphabet’s revenue rose 26% to $63.8 billion in the six months that ended on June 30.
Crunching the numbers
Alphabet does not separately disclose the revenue it earns from YouTube or the amount it spends on YouTube. YouTube has over 1 billion users, and more than 500 million hours of video are viewed on the platform every day. The service receives 1.8 billion logged-in viewers per month. YouTube is one of Netflix’s (NFLX) oldest competitors and features a wide variety of content, ranging from movies to short films to educative tutorials to sports.
Alphabet’s cost of revenue rose at a three-year CAGR of 21% to $45.6 billion in 2017. Its costs rose 10% in 2015 compared to 35% in 2017. The traffic acquisition costs of its Google properties, along with mobile searches and content acquisition costs, primarily triggered these cost levels. The company’s costs made up 39% of its revenue in 2014 compared to 41% in 2017. Alphabet’s cost of revenue rose 36% to $27.4 billion in the six months that ended on June 30. Its costs made up 40% of its revenue in the six months that ended on June 30, 2017, compared to 43% in the six months that ended on June 30, 2018.
Next, let’s discuss how Alphabet is preparing itself for the content-streaming market.