'IT Giants Sweeping Up Ads'... Quarterly Revenue Hits Record High

YouTube Q3 Revenue Hits 5.6 Trillion KRW... Amazon and Facebook Ad Revenues Also Surge
Big Tech Influence Grows Amid COVID-19 Pandemic

Apple iPhone New Model Launch Delay Causes Mobile Phone Sales to Drop from $22.2 Billion to $26.4 Billion

[Asia Economy Reporter Kwon Jae-hee] YouTube, a video-sharing platform, surpassed $5 billion (approximately 5.6 trillion KRW) in quarterly advertising revenue. Despite advertising boycotts, social networking service (SNS) Facebook also saw a 22% increase in advertising revenue compared to the same period last year, showing that IT companies are dominating the advertising market. As a result, the earnings of major U.S. IT companies far exceeded expectations.

According to the Wall Street Journal (WSJ) on the 29th (local time), Alphabet, which owns YouTube, recorded revenue of $46.17 billion (approximately 52.38 trillion KRW) in the third quarter of this year, a 14% increase from the same period last year, marking the highest quarterly revenue ever.

The driving force behind Alphabet's performance was its digital advertising segment. In particular, YouTube's advertising revenue also reached $5.04 billion during this period, setting a new record. Alphabet began disclosing YouTube's performance for the first time earlier this year since acquiring YouTube in 2006, which indicates that YouTube's advertising revenue now accounts for a larger share of Alphabet's total revenue. The proportion of YouTube advertising revenue within Alphabet increased from 7.35% in 2017 to 9.35% this year.

Facebook, which faced backlash due to advertising boycotts, also posted $21.48 billion (approximately 24.36 trillion KRW) in revenue for the third quarter, a 21.6% increase compared to the same period last year. This surpassed the previous record of $21.08 billion set in the fourth quarter of last year. Facebook's active user base reached 1.82 billion, significantly exceeding the market forecast of 1.79 billion, which attracted advertisers.

Facebook Chief Operating Officer (COO) Sheryl Sandberg stated during a conference call, "Currently, Facebook has over 10 million advertisers," adding, "The number of ad impressions across Facebook's services grew by 39% and 40% in the first and second quarters of this year, respectively, and continued to grow by 35% in the third quarter."

CNBC analyzed, "Due to lockdown policies caused by COVID-19, people's focus on online media increased, positively impacting the performance of untact (contactless) companies."

Amazon, a representative beneficiary of COVID-19, also established advertising revenue as another major income source. Amazon recorded $96.15 billion in revenue in the third quarter, achieving its highest-ever performance. Among this, advertising revenue increased by 51% year-over-year to reach $5.4 billion. WSJ commented, "The pandemic caused abnormally strong demand for online shopping," and noted, "In particular, the advertising business has become another cash cow for Amazon."

The increased demand for cloud services due to the COVID-19 pandemic is also considered a key factor driving the strong performance of big tech companies. Google Cloud recorded $3.4 billion in revenue in the third quarter, a 45% increase year-over-year. The revenue generated up to the third quarter of this year has already surpassed the total revenue for 2019. Microsoft (MS), which disclosed its earnings the day before, saw its cloud business Azure grow by 48% during the same period. Amazon Web Services (AWS) also increased by 29% year-over-year in the third quarter.

On the other hand, despite exceeding market expectations, Apple received a disappointing response from investors. Apple achieved $64.7 billion (approximately 73.4 trillion KRW) in revenue in the third quarter, but the delay in launching the new iPhone model caused a sharp decline in smartphone sales. Smartphone revenue dropped from $33.36 billion in the same period last year to $26.4 billion. The shortfall in mobile phone sales was offset by iPad and Mac PC sales. During the same period, iPad revenue increased from $4.66 billion to $6.8 billion, and Mac PC revenue rose from $6.99 billion to $8.93 billion.

CNBC evaluated, "Apple's weak sales in the Chinese market are a painful issue." Apple's revenue in China, including Hong Kong and Taiwan, decreased by 28%, from $11.3 billion in the third quarter last year to $7.95 billion in the third quarter this year.