A couple of years ago at the Structure Conference, Urs Hölzle, SVP of engineering at Google, made a rather bold prediction. He said that by 2020, Google cloud revenue would surpass the company’s ad money, which remains by far the bulk of its revenue.
Even Hölzle admits now that maybe he was being a tad optimistic. I think that was clear from the start.
Google doesn’t actually break out its cloud revenue (.pdf), lumping it in a category it calls “Other Revenue.” That category grew from $2.4B to just over $3.4 B for the period ending Sept. 30, 2017, which translates into 41.67 percent YoY growth. It’s important to note that this category includes Android, hardware and cloud revenue, but it’s probably fair to say that a bulk of that is coming from the cloud, especially since a good portion of that could be coming from Snap, which has a $2B five-year contract with Google Cloud.
Now let’s look at the ad revenue, which grew from $19.8B to $24B for the same period. The Other revenue category has a run rate of $13.4 billion while the ad revenue has a run rate of $96B. That translates into 23.71 percent YoY growth.
While the Other revenue category is growing at almost double the rate of ad revenue, it will take years for it to catch up with ad revenue, assuming all things remain equal, which of course they probably won’t.
Google Cloud is growing at rapid clip. According to data recently released by Canalys, the company’s cloud infrastructure business grew at almost 80 percent in Q3. While it’s hard to see how that fits with the growth of the Other category overall, these firms take other data into consideration when building marketshare and growth figures.
All of this means that while Google Cloud is going to generate a significant and growing amount of revenue over time, it’s fair to say it’s not going to pass Google ad revenue in the next decade, if it ever does.
Hölzle certainly understands that. He told this year’s Structure Conference, “I think I was a little optimistic with 2020, but I don’t think the endpoint has changed,” according to a report on GeekWire.
The numbers tell a different story. Google is far behind Google and AWS at this point, and even though it’s growing fast, and the cloud pie still growing at a brisk pace, it seems highly unlikely that cloud revenue would surpass ad revenue any time soon. The numbers just don’t support that idea.
Photo: Web Summit on Flickr. Used under CC by 2.0 license.