Dive Brief:

• Alphabet, Google’s parent company, released its fourth quarter earnings Thursday, which missed Wall Street analysts’ mark growing just 8.3% to $5.33 billion in profits but also showed the company seeing success in new strategies beyond its core search business, according to The Wall Street Journal. 

• Alphabet pointed to a one-time tax adjustment as the reason it came up short in Q4. While aggregate paid clicks were up 36% year-over-year, cost per click was down 15%, which also provided a hit to revenue. Both figures were the highest in the past three years, per the Journal.

• Overall revenue was up 22% year-over-year, an increase led by mobile search and YouTube, according to Alphabet CFO Ruth Porat. 

Dive Insight:

Google’s bottom line has been continually affected by the accelerated rate of mobile adoption and use, as it can’t charge as much for mobile paid search advertisements as it can for placements on desktop. However, Alphabet put a fresh emphasis on the dominance of YouTube in its most recent earnings call, suggesting that the growth of ads on the video portal is starting to play a more significant part in driving revenue for the company, per the Journal.

Recent forecasts reported by eMarketer suggest YouTube’s net U.S. video ad revenue could reach $2.59 billion in 2017, accounting for 20% of total U.S. video ad revenue and making for the largest share of video ad revenue for any one company. A JMP securities analyst told the Journal that YouTube could be the "heir apparent" to Google’s search business.

Video is becoming an increasingly essential content type for marketers, especially on mobile, where social apps like Snapchat and YouTube draw huge audiences. However, monetization strategies for these offerings are still being figured out, and Google charges less for YouTube ads than those served through its core search platform, again contributing to the disparity between ubiquity and revenue.  

Outside of YouTube, other focuses for Google and parent Alphabet going forward include mobile search and automated ad buying, with CFO Porat noting on the earnings call that there are "sizable opportunities that have not yet been tapped" in these areas, per the Journal.

Automated ad buying has become popular for its ability to efficiently complete the more rote or mundane aspects of media purchasing and placement. However, automated technologies have shown they often don't account for the quality or credibility of media, which has compounded issues like fake news. Google has recently been more proactive in weeding out bad media as a result, banning, to date, some 200 publishers in its ad network.   

Other new Alphabet offerings including hardware like the Google Pixel phone, the Daydream VR headset and the Google Home digital assistant also look promising, contributing to a 62% jump in growth for the company’s non-advertising business, per the Journal, though advertising remains its dominant source of revenue by a wide margin.