Google Eyes Expansion in India

Recently Google (NASDAQ: GOOG) announced its second quarter results that surpassed market expectations. However, the COVID crisis is hitting Google as well. Advertising revenues fell and Google reported its first revenue decline in over a decade.

Alphabet’s Financials

Alphabet’s first quarter net revenues dropped 2% to $38.3 billion, ahead of the market’s forecast of $37.37 billion. This is the first time that Google’s revenues have shrunk year-over-year since 2009. Net income dropped from $9.9 billion a year ago to $7 billion. Adjusted earnings of $10.13 per share were higher than the market’s forecast of $8.43 per share.

By segment, Google Properties revenue dropped 7.7% to $25.13 billion. Google Properties revenues includes ad and services revenue from internet search, Gmail, Google Play, and YouTube. YouTube revenue rose 6% to $3.8 billion. Google Other revenues, which consist of YouTube non-advertising revenues, grew 26% to $5.1 billion. Google’s net revenue, excluding traffic acquisition costs (TAC), of $31.6 billion was better than the market’s forecast of $30.5 billion. TAC decreased 10.2% to $6.69 billion compared with the estimates of $6.67 billion. Revenues from Other Bets fell from $162 million a year ago to $148 million for the quarter.

Google’s core search and ad revenue dropped 9.8% year-over-year. While YouTube’s ad revenue growth also dropped, it still managed to beat expectations with a total of $3.81 billion.

Google does not provide an outlook for the quarter or the year, but analysts expect the results to be weak given that advertising is still Google’s core revenue source.

Alphabet’s Cloud Growth

Google has been focusing its efforts on making its products more relevant during the COVID crisis. It is providing locally relevant and helpful information about COVID in over 70 languages in 200 countries across search and all its products. For instance, YouTube tied up with public health officials in over 90 countries and services panels to spread locally relevant information. On Google Maps and Search, it now displays over 12,000 COVID-19 testing centers across 20 countries. It is also helping small businesses by providing information such as takeout, curbside, updated hours, donations, and gift cards.

Amid the crisis it is ensuring that it protects users’ privacy. It has set people’s location history and web in-app activity to delete automatically after 18 months as the default. It integrated password checkup into its core security checkup to help people detect any instance of their online accounts being compromised. The latest Android 11 Beta that was launched this quarter also provides a significant focus on privacy and security, including control over app permissions and restrictions on app’s usage of background location.

It is helping small merchants with their e-commerce capabilities by enabling them to lower their costs and improving their reach in a few ways. Businesses can now list their products for free on the Google Shopping tab and on Search to help drive more traffic. This is also making its results more comprehensive and useful. It recently announced that sellers on Buy on Google will no longer need to pay a commission fee. To help SMBs, Google included Smart Campaigns on Google Maps that help customers know that their businesses are open. Additionally, it is giving retailers more choice by opening its platform to third-party providers, such as PayPal and Shopify.

Within search, it gave search advisers the ability to add high-quality images to their ads. It also added features to allow buyers to shop more easily through video ads. As more businesses move their operations online, Google is helping them place video ads on YouTube.

Google’s India Focus

Google announced plans to invest $10 billion in the Indian economy as part of its India Digitization Fund. Over the next 5 to 7 years, it will help accelerate the growth of the digital economy in the country. It is working on four key focus areas in the country. First is to enable affordable access and information in India’s local languages. A few of the Google services are already available in local languages like Hindi and Bengali. It plans to extend those capabilities to other services and other local languages. Second, it plans to build new products and services that will be more relevant to India’s needs. Third, it plans to help businesses continue their digital transformation activities and finally, it will focus on leveraging technology and AI capabilities to improve information in areas such as health, education, and agriculture.

With a population of more than 1.3 billion, India is a big market opportunity. However, regulatory and infrastructure issues have kept a lot of these companies away from the market. That is changing soon. Google’s products such as Search, Maps, YouTube, and Android are already used heavily in India. But the internet is still a luxury for a majority of the population. Reports suggest that 500 million people in the country are online with over 450 million smartphones users. Google hopes to make “the internet affordable and useful for a billion Indians”.

As part of this initiative, it invested $4.5 billion in Jio, India’s leading mobile platform owned by Reliance Industries. Jio had already received significant funding from Facebook, Intel, and other investors for similar efforts. Other tech giants like Amazon, Netflix, and Facebook have already expanded their efforts in growing their market position in the country.

The market was pleased with Google’s results and the stock climbed 3.3% in the after-hours session. Its stock is trading at $1,500.10 with a market capitalization of $1.02 trillion. It had climbed to a 52-week high of $1,586.99 in July this year. The stock had fallen to a 52-week low of $1013.54 in March last year.