Following Facebook, Google, Microsoft, and Twitter all released strong quarterly earnings on Tuesday, fueled by digital advertising, cloud computing, and e-commerce.
Following Facebook, Google, Microsoft, and Twitter all released strong quarterly earnings on Tuesday, fueled by digital advertising, cloud computing, and e-commerce. Even if Apple's advertising limits take effect, the Gafams are likely to set a new record in 2021.
Champagne! Following Facebook's announcement on Monday, Google, Microsoft, and Twitter all released strong quarterly earnings on Tuesday evening, confirming their raucous health. These outstanding results might allow them to conclude the year 2021 with new records, as big winners of the crisis in 2020.
The revival of digital advertising, the migration of organizations to the cloud, and e-commerce all help the three behemoths. However, the Gafams are encountering "headwinds," beginning with Apple's new advertising targeting limits and regulatory efforts in Europe and the United States.
1. The return of advertisers
Thousands of SMEs that buy Facebook ads and Google keywords have increased their spending in the wake of the economic recovery, after freezing their advertising budgets during the height of the crisis. As a result, the two behemoths, who rely nearly entirely on digital advertising, are capitalizing on this trend.
Alphabet, Google's parent company, raised its advertising sales by 43 percent in a year, to more than 53 billion dollars. Even if the rate of growth is less than in the second quarter (+68%), this gain still allows it to earn a net profit of $19 billion, or 70% more in a year.
To be more specific, the search engine always releases three-quarters of this amount. The gradual revival of tourism and the reopening of businesses has resulted in a rise in user requests (for plane tickets, hotels, and so on). YouTube, on the other hand, surprised investors by reporting $ 7.2 billion in advertising income, a bit less than projected, despite strong increase in a year.
Facebook's advertising income has increased by 33% in a year to more than $ 21 billion. Despite being less important to companies than Instagram or Facebook, Twitter saw a 41% growth in advertising income. "Companies are anticipating a social-driven future, and social media spending is expanding at a quicker rate than before," said Yuval Ben-Itzhak, chief strategy officer of Emplifi, which administers 8 million brand accounts on social networks.
Apple's advertising limits, on the other hand, are beginning to be felt. iPhone users running iOS 14.5 have had the option of accepting or refusing to share their data with third-party apps for the past year. As a result, Apple intends to improve "privacy" protection. However, the digital advertising ecosystem, led by Facebook, sees it as primarily a move to bolster Apple's position in the area.
When given the option, "only 15 percent to 30 percent of consumers accept to be followed," according to Dan Ives, a Wedbush analyst reported by CNBC. "There's a huge black cloud hanging over Facebook." "The relevance of our advertising targeting has declined as a result of Apple's new system," admitted Sheryl Sandberg, Facebook's director of operations.
On the other hand, these positive outcomes provide more confidence to Gafa regulation proponents. In the United States, Google is the subject of multiple antitrust investigations. He is accused by several prosecutors of having a "illegal monopoly" on web research and advertising. After fining Google three times for anti-competitive tactics in the "display" market, the European Commission started an investigation in June into possible anti-competitive conduct by Google in the "display" market.
2. Businesses are migrating to the cloud.
Since the outbreak of the pandemic, Microsoft has been spurred by the faster digitalization of businesses and the movement of their IT to the cloud. Its net income increased 48 percent to more than 20 billion in the first quarter of its fiscal year 2021-2022, on a turnover increase of 22 percent to 45.3 billion, its best performance since 2014.
Its cloud services have risen rapidly (+ 36%), fueled by its Azure platform, which has increased by 50% in the last quarter, as it has in prior quarters. "Bad mouths predicted a reduction in cloud expenditure following the Covid impact six months ago, but the reverse has happened," Dan Ives said. These statistics are even "a prize" for Microsoft CEO Satya Nadella, according to the analyst.
After Microsoft, everyone's attention is now focused on Amazon. The market leader is expected to release its findings on Thursday evening. Amazon Web Services, the company's cloud division, had a 37 percent increase in revenue in the second quarter.
3. E-commerce is progressing, but at slower rates
Amazon's performance will also be a barometer of the health of online commerce, which has been one of the biggest beneficiaries of the epidemic. In France, approximately one out of every six items is now purchased online... Every day, 1 billion "shopping sessions" occur on Google's different platforms.
However, with the lockdowns' expansion, Google, Facebook (which has made e-commerce a significant monetization axis, particularly on Instagram), and Amazon are prepared for slower growth. "More and more people are doing their shopping in person. This isn't to say that e-commerce isn't expanding, but it isn't growing at the same rate as it was during the financial crisis, as Facebook's Sheryl Sandberg points out.
Only Apple is still absent from this table. The apple company will also disclose its findings on Thursday evening.