Ad revenue continues to boom for Alphabet in Q3

The company also reported that it hasn't seen the same impact from ATT other internet companies have grappled with.

Google and YouTube parent company Alphabet got a big revenue boost in Q3 as digital ad spending continues to rise.

Revenue grew by 39% on a constant currency basis for the three months ended Sept. 30. Total ad revenue was up by $16 billion, or 30.2%, year-over-year, with 30.1% growth in YouTube ads, 28.5% growth in ads from the Google Network and 30.6% growth in Google Search and the rest of its ad business, the company’s largest revenue driver.

During a call with analysts, SVP and chief business officer Philipp Schindler attributed the gains, quite simply, to broad strength in advertiser spending, particularly in retail and finance, as well as recovery in the entertainment and travel sectors. While uncertainty remains in the pandemic, he says the kind of tools Google offers to respond to uncertainty has been helpful and attractive to brands, and omnichannel features have been in high demand as retail opens in some parts of the world.

Schindler added that YouTube’s reach is becoming increasingly incremental to TV, with connected TV being the company’s fastest-growing channel.

Though it was not referenced in management’s comments or investor call, Alphabet’s earnings were released the same week showing that documents from a lawsuit alleging anti-competitive business practices – first brought against Google by Texas’ Attorney General late last year – were un-redacted.

Among the claims brought by the Texas AG are that, by owning both the largest display- and supply-side brokers, Google acts as “pitcher, catcher and umpire” in the programmatic ad marketplace, allowing it to charge fees of between 22% to 42% on ads, 22% on clearing prices for publishers and up to 40% on its display ad network. Other claims included the existence of a program code-named “Jedi” that would allow its own exchange to secretly win bids to compete with the introduction of header bidding; that it collaborated with Facebook on ways to manipulate header bidding; and that it charges high switching costs to prevent publishers from using other options.

Google’s stance on the claims has been that allegations are not true, reiterating that it remains committed to consistent privacy rules.

One focus for analysts during the earnings call was iOS 14 and the impact of ATT, which has been cited as being a major disruption to the ad business at Facebook and Snap in the last two quarters.

Ruth Porat, SVP and CFO, said the company has only seen a “modest” impact on revenue from ATT, and that, on the flip side, it also hasn’t seen a major shift in budgets from more mobile-focused companies over to Google. Schindler added that ATT was part of a broader ecosystem change around privacy and data collection, and that the company continues to invest in technology that preserves policy while mitigating impact to businesses that rely on its advertising.