Business is booming at Google’s parent company, Alphabet Inc, even as it loses billions of US dollars on kooky-sounding projects that might never produce any revenue.
Losses have been piling up in Alphabet’s “X” lab, a wellspring of far-out ideas that has become known as a “moonshot factory” since Google cofounder Sergey Brin launched it about six years ago.
The lab is responsible for some once-zany projects, such as Google’s self-driving cars, that matured into potentially revolutionary technology. It also has pursued, but ultimately abandoned other outlandish endeavors, such as an effort to convert seawater into gasoline.
Like going to the moon, exploring new technological frontiers is expensive.
Although Alphabet does not specify just how much money it pours into the X lab, it is among the costliest drains in a far-flung category that falls under the “Other Bets” segment in the company’s financial statement.
Fiber, an effort to bring ultra-fast Internet service to major US cities, is also requiring huge investments.
Alphabet’s second-quarter earnings report, released on Thursday, showed an operating loss of US$859 million in Other Bets, widening from a US$660 million loss a year ago. It is the second consecutive quarter in which losses have deepened. Last year, Other Bets lost US$3.6 billion — exceeding the annual revenue of many companies.
The Mountain View, California, company can afford to gamble because Google runs the world’s most profitable advertising network, spread across its dominant search engine, YouTube video site and Gmail, as well as millions of third-party Web sites that draw upon its marketing machine.
Powered by Google, Alphabet earned US$4.9 billion during the April-June quarter, a 24 percent increase from the same time last year. After subtracting advertising commissions, Alphabet’s revenue climbed 22 percent to US$17.5 billion.
Astro Teller, who runs the X lab, says he strives for a balance between the pursuit of envelope-pushing technology and Wall Street’s demands for some semblance of fiscal prudence.
“In short, we try to steer X to be ‘responsibly irresponsible’ as we develop new products,” Teller wrote in an online essay published on Thursday.
Alphabet’s stock gained US$43.16, or more than 5 percent, to US$809, positioning it to potentially surpass its all-time high of US$810.35 in Friday’s regular trading session.
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