Google, Spotify get big boosts in ad revenue

Alphabet reported a jump in spending from retailers, while Spotify expects advertising to be a major revenue driver in the future.

Tech companies continued to recover from the impacts of the pandemic in Q2, with Google and Spotify the latest to report better-than-expected earnings on the back of gains in their ad business.

Google parent Alphabet reported $61.88 billion USD in revenue for the three months ending June 30. That’s up by 62% year-over-year and 59% when compared to Q2 2019.

The results were driven by a rebound in Alphabet’s ad business. Total advertising revenue was up 69% year-over-year, including a 68% boost in revenue from search and a 84% increase in ad revenue on YouTube, helped by the evolution of the connected TV space.

In particular, chief business officer Philipp Schindler said during an investor call that retailers were the biggest contributor to ad growth. This was not just because of a return to ad spending as major bricks-and-mortar stores reopen, but also because of investments the company has made into online shopping on the platform. In Q2, Alphabet made heavy investments into its Graph search function, and made ecommerce listings available to more small and medium businesses through partnerships with the likes of Shopify, Squarespace and GoDaddy.

While Spotify missed its own guidance on monthly active user growth (22%), total revenue was up 23% year-over-year in Q2, driven by 20% growth in paid subscribers and a staggering 110% boost in ad revenue. Compared to the previous quarter, revenue was up 9%, with ad revenue up 28%.

That boost was driven, in part, by the launch of Spotify’s audience network, making buying on the platform available programmatically and increasing the amount of monetizeable content on the platform. The company also touted new features for its existing ad products, as well as its podcast development strategy, offering more high-demand opportunities for advertisers.

Spotify co-founder and CEO Daniel Ek said during an investor call that “the days of our ad business accounting for less than 10% of our total revenue are behind us,” and expected it to continue to grow.