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How Much Has YouTube Contributed to Alphabet’s Revenue and Costs?

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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.

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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.

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