Alphabet Plays the Long Game, Expanding and Investing in R&D, with Focus on Video

Alphabet is investing in its future, spending record funds on R&D and pouring money into non-core businesses such as self-driving cars (Waymo) and its video platform (YouTube). While the company exceeded analyst expectations on the back of ever-strong growth from its core search business, it was actually trading down on Monday, reflecting investor anxiety over the cost and ultimate profitability of its many secondary businesses. 

Still, revenue for the quarter topped the previous year’s by nearly $7 billion, and annual revenue registered a whopping jump to $136 billion from $110 billion for 2017. That mammoth growth, like the kind Facebook reported last week, suggests that the duopoly’s ability to hoard digital ad dollars will keep it afloat until a true competitor emerges or the switch from print to digital slows down.

What’s more, Google is positioning itself to withstand that eventual deceleration. On the earnings call, Google CEO Sundar Pichai pointed to the future of YouTube as central to Alphabet’s overall long-term well-being. 

“In the long run, for me, YouTube is a place where we see users come not only for entertainment,” Pichai said. “They come to find information.”

While Alphabet is keeping its cards close as far as YouTube’s margins are concerned, the money it’s pouring in now seems likely to pay dividends later, as video is coming to occupy a more and more central place in the digital marketing landscape that is Alphabet’s bread and butter.

Joe Zappa is Street Fight’s Managing Editor.