YouTube Steals the Show

(Tech stock columnist Jon D. Markman publishes Strategic Advantage, a lively, lucrative guide to investing in the digital transformation of business and society. Click here for a free trial.)

Alphabet ( (GOOGL) - Get Free Report), the parent company of Google, is killing it operationally. And investors absolutely should have been able to see this coming.

The Mountain View, Calif.-based company reported Tuesday that ad revenue grew 69% versus a year ago. Its YouTube business logged sales of $7 billion. That is nearly as big as Netflix ( (NFLX) - Get Free Report).

Every part of the business is growing fast. More importantly, it was all predictable.

Ruth Porat joined Google in 2015 as chief financial officer. Bloomberg reported that her $70 million deal with the company gave her free rein to impose financial discipline and reorganize the various business segments. It has been a runaway success.

Institutional Investor named her internet CFO of Year in 2018 for her plan to force Google’s projects to behave as independent businesses.

Today the so-called alpha “bets” are flourishing. YouTube is the star.

According to the press release the video-sharing website totaled $7 billion in sales, up 83% from a year ago. Keep in mind that numbers last year were inflated by the pandemic when millions of people were shuttered at home. And YouTube Shorts, a TikTok competitor, has already scaled to 15 billion views daily, up from only 6.5 billion views in March.

The growth is possible because YouTube has an extremely large franchise, with more than 2.3 billion monthly active users. Porat challenged managers to better monetize the platform. The result is better data analytics, better ad rates, more ads and bigger profits.

Alphabet shares zoomed 3% higher Tuesday to $2,719 in after hours trade. The stock is still a buy into any weakness. Porat is only getting started.