Google shifts focus as ad industry watches

Google is quietly shifting its identity from an advertising giant to a broader technology company, a move that could reshape the digital ad setting. The latest financial results from parent company Alphabet show this pivot, even as the company remains the dominant force in online advertising.

Ad revenue still drives the machine

Alphabet reported $120 billion in revenue for the second quarter, a 24% increase from the same period last year. Of that total, $81.63 billion—68% of the company’s earnings—came from advertising, marking a 14.5% year-over-year growth. Search advertising remains the crown jewel, generating $63 billion in the quarter. The company credited its AI efforts, particularly the Gemini model, for driving performance in this segment. Other divisions, like YouTube and Google Network, lagged behind, with the latter actually shrinking year over year—a detail that won’t escape antitrust regulators.

The $1 billion fine Google recently incurred for violating the EU’s Digital Markets Act barely registers against these figures.

Cloud computing emerges as the next frontier

While advertising still dominates, Google Cloud is growing at a breakneck pace. The division brought in $24.77 billion in the quarter, an 82% increase from the previous year. That’s still far behind Amazon Web Services, which posted $37.6 billion in revenue for the first quarter alone.

This isn’t just about cloud storage or computing power. Sources have long told Digiday that this area is key to any outfit eager to rival Google’s long-held dominance of the online media setting. While there is no direct public evidence that Google or Amazon are explicitly tying their cloud services to ad deals, the putative belief among many outside Big Tech is that such players make policy decisions with their own interests first and foremost.

Google has never defined itself as an advertising or media company, but to adapt a phrase popularly attributed to adland doyen Martin Sorrell: if the majority of your revenues come from media, then you’re a media company. The most recent quarterly filings vindicate this notion.

For now, the ad business hums along, though Wall Street’s reaction to Alphabet’s earnings was lukewarm. Investors seem more interested in the company’s AI investments than its core revenue streams. Google’s legal troubles continue to pile up, but as long as the money keeps flowing, they’re unlikely to slow the company down.