YouTube is a $15 billion-a-year business, Google reveals for the first time

YouTube generated nearly $5 billion in ad revenue in the last three months, Google revealed today as part of parent company Alphabet’s fourth quarter earnings report. This is the first report under newly instated Alphabet CEO Sundar Pichai, who took over as the chief executive of the entire company late last year after co-founders Larry Page and Sergey Brin stepped back from day-to-day duties and promoted Pichai, formerly Google CEO, to the top spot.

The announcement marks the first time in YouTube’s nearly 15 years as a Google-owned platform, since Google bought the website in 2006 for $1.65 billion, that the company has revealed how much money YouTube-hosted ads contribute to the search giant’s bottom line.

On an annual basis, Google says YouTube generated $15 billion last year and contributed roughly 10 percent to all Google revenue. Those figures make YouTube’s ad business nearly one fifth the size of Facebook’s, and more than six times larger than all of Amazon-owned Twitch.

Separately, Google says YouTube has more than 20 million subscribers across its Premium (ad-free YouTube) and Music Premium offerings, as well as more than 2 million subscribers to its paid TV service. Alphabet says revenues from those products are bundled into the “other” category, which made $5.3 billion last quarter and also includes hardware like Pixel phone and Google Home speakers. That makes it hard to gauge the specific performance of any one product bundled under that category.

Overall, Alphabet made $46 billion in revenue in the quarter that ended December 31st, 2019, a 17 percent jump over 2018. Nearly $10.7 billion of that was profit, the company says. Google’s search business remains the big moneymaker of Alphabet’s sprawling empire, earning $27.2 billion for the quarter. But alongside YouTube ad revenue, Google is also disclosing the financial performance of its cloud computing division. Google Cloud made $2.6 billion in revenue for the quarter, the report reveals.

That means Google massively beat Wall Street expectations on profit, but missed on revenue. That could be one reason why Google may be disclosing YouTube and Google Cloud revenues for the first time.

To appease investors, it’s important for Google to remind onlookers that its business isn’t solely dependent on its search engine, and that it has fast-growing and separate businesses like YouTube and its cloud computing division to pick up the slack.

Google Search generated an eye-popping $98.1 billion in 2019, the company says, but that’s just a 15 percent increase over 2018. YouTube, on the other hand, grew from $11.2 billion in 2018 to $15.15 billion last year, a 36.5 percent jump. That said, a revenue miss of this magnitude for Alphabet means investors were not pleased, and Alphabet stock is now down more than 4 percent in after-hours trading.