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Alphabet's 'Other Bets' Start Making Higher Profits Amid Moon Shot Shutdowns

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If you feel that Google claims all the eggs in the Alphabet basket, that is still true as the search division generated the bulk of the company's $26.06 billion revenue for the fourth quarter of 2016. Its moon shot initiatives, however, seems to be paying off as they also posted significant improvements compared with their sales performances in 2015.

Alphabet's Other Bets

In the Alphabet report, these projects, which are practically all other products and services outside of Google and YouTube, have been lumped in a category called "Other Bets." They collectively earned $260 million, an impressive uptick from the $150 million they eked out in the same period in 2015.

"Our growth in the fourth quarter was exceptional," Ruth Porat, Alphabet's CFO, said. "We're seeing great momentum in Google's newer investment areas and ongoing strong progress in Other Bets."

Projects in the segment, however, are not all successful. So far, Nest, Fiber, and Verily are said to have accounted for the bulk of improvements.

There are underperforming units that could possibly get the axe as Google stick with what works and trim those that don't. For instance, there are reports that state how the robotics division is getting pared down.

Future Prospects

Unfortunately, Alphabet's official statement did not include the performance breakdown of the Other Bets so there is no information about which unit will need to go. This should be interesting especially with what Porat recently told analysts.

"The internal transparency we've provided to our business leaders across the Other Bets and Google is helping us to allocate resources more thoughtfully across the opportunities that we see," Porat said. "As we reach for moon shots that will have a big impact in the longer-term, it's inevitable that there will be course corrections along the way."

Porat's pronouncements underscore an increasing focus to generate revenue. The division's loss amounted to $1.1 billion. While this figure shows a marked decline compared with the $1.2 billion losses incurred in 2015, it is still quite significant. It helped send Alphabet's shares falling nearly 3 percent on Wall Street despite the overall increase in the company's profits for the last three months.

Alphabet's profits have been driven by a steady increase in advertising revenue especially from mobile devices as well as from YouTube. For the past quarter, Google advertising accounted for $22.40 billion.

Other Bets And Alphabet's Ambitions

Still, observers see a massive potential for a number of other bets such as the looming introduction of a Waymo self-driving car and the expansion of the Google Cloud, to name a few. The argument is that despite losses, these initiatives are establishing Alphabet's foothold on product segments that it wants to dominate in the future.

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