five questions to understand these record profits

Google announced on Tuesday evening that it had made 76 billion dollars (67 billion euros) in net profit for the year 2021. This is almost double that of 2020. How has the company benefited from a growth so strong ?

Google almost doubled its profits in 2021 compared to 2020, and its share price exceeded $3,000 © AFP / Tayfun Coskun / ANADOLU AGENCY

A fruitful holiday season and good financial health: Tuesday evening, Google announced record results, with an increase of more than 30% over the last quarter of the year, and above all a doubling of its profits in 2021 compared to 2020.

What record numbers are we talking about?

The company announced that it had achieved 75 billion dollars in turnover in the fourth quarter of 2021 (a figure up 32% compared to the previous one), from which it generated just over 20 billion in profits. . But above all, the group recorded a net profit of 76 billion dollars, or around 67 million euros, for the whole of 2021. This is almost double the previous year.

What pays so much to Google?

If the general public knows Google mainly for its search engine, its applications and possibly its connected devices, its first source of profits is the sale of advertising space. In this area, Google is the market leader, ahead of Facebook. By selling advertisements that appear at the top of search results or around YouTube videos, the company generated $61 billion of the $75 billion in fourth-quarter revenue.

It’s not the company’s only source of revenue: Google is also benefiting from the explosion of its cloud hosting services. The number of cloud contracts jumped 80% in 2021, and its revenue increased by 45% – to $5.5 billion. Sales of Google-branded phones, the Pixels, are also doing well according to the company, and this “despite supply chain challenges“.

Hasn’t the lockdowns affected Google’s business?

On the contrary: the confinements and restrictions linked to the health crisis have boosted Google’s performance as an advertising supplier. “Since the beginning of Covid, we have seen consumer habits change,” said Philipp Schindler, Google’s vice president of sales: with teleworking and the rise of e-commerce, advertisers have increasingly directed towards advertising on the Internet… and therefore towards Google. The entire market, and in particular the GAFAs, benefited from this.

Google also benefited from strong sales momentum during the holiday season: “In 2020 and 2021, consumers spent more money, earlier and more regularly“, adds Philipp Schindler.

What are the consequences of these good results?

Google shares rose 9% on the New York Stock Exchange after the results were announced. Thus, the stock price broke above the $3,000 mark. The company announced, along with its good results, that it would allow a stock split (20 for one) to allow smaller investors to take their share – so it will be possible to buy a twentieth of Google action.

According to analysts, Google’s results should lift the entire market. And it’s not set to stop in 2022, with digital advertising revenue estimates at $171 billion – that would represent 30% of the entire market.

Is there a risk of dismantling for Google?

In the United States as in Europe, legal actions and bills and regulations to try to prevent situations of monopoly of Google as of all GAFA are multiplying: last week for example, several American prosecutors attacked Google, accusing it of collecting geolocation data from users, including when they do not give their consent – ​​which the company denies. In the European Union, Google was again sanctioned by the Cnil at the beginning of January, to the tune of 150 million euros, because both of them do not make it easy to refuse cookies – lines of computer code which make it possible to trace Internet users. And last November, Google was sanctioned by European justice, fined 2.4 billion euros for anti-competitive practices.

On Tuesday, Google CEO Sundar Pichai said he was “really worried” about these attempts to limit Google’s influence, citing “unintended consequences”: “In some cases, we are really worried because they risk breaking many services that are very popular with our users,” he said.

Leave a Comment