Google's parent company more than doubled the revenue it generated from its moonshots like its smarthome company Nest, broadband provider Google Fiber, and life sciences division Verily. Unfortunately, Alphabet is also losing more money on those bets.
In its second quarter earnings report today, Alphabet said revenue from its so-called "other bets" rose from $80 million last year to $188 million for the same quarter this year. But overall losses devoured that growth and then some, mounting to $802 million from $633 million during the same time last year.
That's just one piece of bad news for Alphabet, which missed analyst expectations, sending shares tumbling nearly six percent in afte- hours trading despite 17 percent revenue growth year-over-yeas.
Alphabet has been haunted in recent weeks by rumors that Nest is underperforming and struggling to retain key employees amid internal strife. The company's decision to stop supporting its Revolv smart hub product, effectively making the device worthless, didn't help with the perception that not all is well at Nest. Meanwhile, Alphabet is reportedly looking to sell off robotics company Boston Dynamics.
These projects are important for Alphabet as investors pressure the company to diversify its revenue beyond Google's search business. But Google does have one non-search success story: YouTube has emerged as one of the company's most important revenue streams.
In a call with analysts, CEO Sundar Pichai said that a decade ago, YouTube seemed like a moonshot. While streaming video is not quite in the same league as building human-like robots, it's true that Google's billion-dollar acquisition of the site in 2006 seemed a little crazy. YouTube let people upload huge video files for free while many of those same users blatantly and routinely violated copyrights. During the hangover of the dotcom bust, the idea that YouTube could pay its infrastructure bills with ads seemed farfetched. That wild bet paid off. Some of Google's other crazy ideas may work out yet.
