Shares of Google-parent Alphabet(GOOGL) soared and hit a 52-week high after reports that it would restructure its ad sales unit to focus more on Artificial Intelligence.
Sean Downey, who leads Google’s ad business in North America and South America, said in a department-wide meeting that the company’s 30,000-person ad sales unit would be reorganized, according to people familiar with the matter. He did not specify any layoffs.
This helped the Alphabet stock price to rise 3% on Wednesday.
The reorganization is the result of Alphabet's leaning towards AI to generate and place ads on Google, YouTube, and its other platforms. Alphabet generated over $54.5 billion in revenue- or 80% of the total revenue from ad sales in the third quarter.
Alphabet Dives into AI
Alphabet got a bullish note from Raymond James yesterday after the market closed. The research firm resumed coverage on the stock with an outperform rating and a price target of $150, realising the potential of a platform transition driven by generative artificial intelligence. It also noted that its estimates were slightly above consensus, as it saw continued momentum on YouTube.
Generative AI can be significantly cheaper than conventional methods for both ad creators and sellers. WPP, the world’s largest advertising firm made a deal with NVIDIA in May to create AI-enabled content development engines.
Room for Cost-cutting
Alphabet laid off 12,000 employees at the beginning of the year, however, investors and other experts have urged the company to cut costs further and the reorganization seems likely to lead to that. Though Alphabet already has wide margins, the search monopoly sells itself and could likely be more profitable.
Source: Trading View
Key Takeaways
- Google-parent Alphabet's share price rose as the company reports restructuring its advertising business, which accounts for 80% of its overall revenue.
- Alphabet is leaning more towards generative AI to generate and place ads on Google, YouTube, and other platforms.
- Generative AI can be significantly cheaper than conventional methods for both creators and sellers.
