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Google cloud is still losing billions

Google cloud is still losing billions
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updated: 08-02-2021 | 08:49
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Thanks to the home office boom in 2020, the demand for cloud services has grown explosively. Which data giant benefits the most from this corona effect?

 

Last week, Google's parent company Alphabet announced for the first time how much is being earned with Google Cloud. The service suffered $ 5.6 billion ($ 4.2 billion) on sales of $ 13.1 billion last year.

 

Google is taking significant start-up losses to catch up with market leaders Amazon and Microsoft. These companies also just announced their results. In comparison, Amazon Web Services and Microsoft Azure revenue in one quarter is about the same as what Google earns in an entire year. And they're both profitable - at Amazon, AWS is by far the largest money maker, at Microsoft, Intelligent Cloud, which includes Azure, accounts for a third of the quarterly profit.

 

The pandemic is forcing companies, governments and educational institutions to invest more in computing power and remote software. Research firm Canalys sees this in the figures for 2020: investments in cloud infrastructure worldwide grew by 33 percent to 142 billion dollars.

 

Even among tech giants, one has to be the smallest. Amazon is still by far the market leader (31 percent), followed by Microsoft (20 percent). Google has a market share of 7 percent, but thanks to the enormous investment it is expanding the fastest and competitor Alibaba Cloud has already been overtaken. AWS grew 28 percent in 2020, Azure grew 50 percent, according to Canalys.

 

Google can afford the growing pains of the Cloud division. The business runs on online advertisements; these generated a turnover of 169 billion dollars in 2020 (annual profit 41 billion).

 

For a moment it seemed that corona would throw a spanner in the works for Google. Companies abruptly reduced their advertising budgets in the second quarter of 2020. But the recovery came almost as abruptly, in both the search engine and YouTube, which saw sales grow 46 percent in the fourth quarter. YouTube is literally taking over TV, according to Google: In the US, 100 million people watch YouTube on a regular TV screen.

 

An alternative to the cookie

Investors responded enthusiastically to the figures. But Google must prepare for a future where the company has less easy access to user data. Due to stricter privacy rules, technical restrictions in browsers and measures that Apple takes in the iOS operating system, there is less leeway to collect click behavior and interests.

 

Google is setting itself up as the savior of the "healthy, ad-paid free web." Google Chrome, the most used browser, will therefore no longer accept curious third party cookies from 2022. As an alternative, Google is developing a privacy-friendly technique to provide tailored advertisements. It is intended that this so-called "Privacy Sandbox" is also supported by other browsers and advertising companies. There has been little enthusiasm so far.

 

According to Bloomberg, Google is considering forcing apps in the Android operating system to be clearer about how they collect data. It would be a - less far-reaching - variant of Apple's anti-tracking system. A more privacy-friendly image and greater emphasis on paid services could help Google overcome the other challenge facing the company: a long series of lawsuits accusing Google of abuse of power.

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