What you need to know

• For Alphabet, Google AI will significantly expand search capabilities, with 2025 expected to be a pivotal year for search innovation according to CEO Sundar Pichai. The chief says Google’s Project Astra and Gemini Deep Research aim to facilitate complex search queries, enhancing monetisation.
• Two billion consumers are already using Gemini, and younger users are particularly attracted to new AI features like Circle to Search, according to Alphabet. 
• As to the latest financial reports, Google Services delivered $US84 billion in revenue for the quarter, with a 10 per cent year-over-year increase, primarily driven by a growth in advertising. A strong finance category, and the big end-of-year retail shopping festivals, both played a part.
• Meanwhile, YouTube experienced 14 per cent growth in ad revenue, largely due to spending on U.S. election advertising.
• Over at Meta, CEO Mark Zuckerberg says Meta’s AI assistant is projected to reach over 1 billion users, allowing to company to focus on personalised experiences and user engagement at scale.
• And it's advertising business remains in rude health, with Meta's Family of Apps generating US$47.3 billion in Q4 2024, up 21 per cent year-over-year.
• For years, Amazon didn't even mention its advertising revenues, except as an afterthought. But with a $US60bn+ run rate, it is increasingly central to the firm's future. Amazon’s advertising revenue reached $17.3 billion in Q4 2024, an 18 per cent increase year-over-year.
• Most of Amazon's AI commentary this quarter was contained in its comments about AWS. However, CEO Andy Jassy highlighted the potential of innovations like DeepSeek in reducing infrastructure costs and enhancing generative AI capabilities, which he says for most customers have not yet really achieved scale.

The CEOs of the three digital advertising giants Alphabet, Meta and Google were quick to assure investors they have the artificial intelligence chops to not only hold onto their vast digital advertising treasure troves but to grow their empires further through their leadership in the AI advertising space. 

And it's hard to fault the logic. They not only have vast audiences - and the rivers of data gold that flow from them. But as hyperscale technology providers, they understand the mechanics of the next wave of advertising solutions at a granular level, both "on the tin" and in the software that most mainstream media businesses can only dream of.

Mi-3 reviewed the most recent earnings calls and financial filings of the digital giants to better understand the message they want their investors - arguably their real customers - to better understand.

Alphabet

According to CEO Sundar Pichai, AI will expand the universe of search queries, making 2025 a pivotal year for search innovation.

Google's Project Astra and Gemini Deep Research will unlock new types of complex, time-consuming search queries, which will broaden the digital giant’s monetisation potential​. To that end, Pichai noted ads integrated within AI Overviews are performing well, with monetisation rates comparable to traditional search ads.

Pichai said Google’s platforms are putting AI into the hands of billions of people around the world with two billion consumers using Gemini.

“That includes Search, where Gemini is powering our AI Overviews. People use Search more with AI Overviews and usage growth increases over time as people learn that they can ask new types of questions," he said. “This behaviour is even more pronounced with younger users who really appreciate the speed and efficiency of this new format.

"We also are pleased to see how Circle to Search is driving additional Search use and opening up even more types of questions. Circle to Search is a feature that uses Google Lens technology to search for information about images, text or videos on their screen [Literally ‘circle and search]. This feature is also popular among younger users. Those who have tried Circle to Search before now use it to start more than 10 per cent of their searches. As AI continues to expand the universe of queries that people can ask, 2025 is going to be one of the biggest years for Search innovation yet.”

According to Philipp Schindler, SVP and CBO, Google, Google Services revenues were US$84 billion for the quarter, up 10 per cent, driven primarily by 11 per cent year-on-year growth in Advertising revenues. Strong growth in Search and YouTube advertising was partially offset by a year-on-year decline in Network revenues. The 13 per cent increase in Search & Other Revenues was led by financial services and retail. 

“Retail was particularly strong this holiday season, especially on Black Friday and Cyber Monday, which each generated over $1 billion in ad revenue. Interestingly, despite the US holiday shopping season being the shortest since 2019, retail sales began much earlier, in October, causing the season to extend longer than anticipated," Schindler continues.

Meanwhile, YouTube’s 14 per cent growth was driven by strong spend on US election advertising. The combined spending of both major parties almost doubled the 2020 election advertising investments, he said.

“In Q4 we saw continued strong growth in revenues from Search. In Search, we're seeing people increasingly ask entirely new questions using their voice, camera, or in ways that were not possible before, like with Circle to Search. We're making these benefits available to more consumers," Schindler said.

According to Google, it's present in over half of journeys where a new brand, product, or retailer is discovered.

“By offering new ways for people to search, we're expanding commercial opportunities for our advertisers. Shoppers can now take a photo of a product and, using Lens, quickly find information about the product, reviews, similar products, and where they can get it for a great price. Lens is used for over 20 billion visual search queries every month, and the majority of these searches are incremental," Schindler added.

Meta

According to CEO Mark Zuckerberg, there are several important product trends related to what Meta calls, "It's Family of Apps" set to unfold this year.

"We're going to learn what's going to happen with TikTok, and regardless of that, I expect Reels on Instagram and Facebook to continue growing. I expect Threads to continue on its trajectory to become the leading discussion platform and eventually reach 1 billion people over the next several years," he said.

Threads, Meta's X clone released during the weeks when Elon Musk was visiting maximum disruption on the old Twitter (now X) business, today has more than 320 million monthly active users. And Zuckerberg said it has been adding more than 1 million sign-ups per day.

"I expect WhatsApp to continue gaining share and making progress towards becoming the leading messaging platform in the US like it is in a lot of the rest of the world. WhatsApp now has more than 100 million monthly actives in the US," Zuckerberg said. "Facebook is used by more than 3 billion monthly actives and we're focused on growing its cultural influence. I'm excited this year to get back to some OG Facebook."

But it was AI where he placed most of his emphasis.

"This is going to be the year when a highly intelligent and personalised AI assistant reaches more than 1 billion people, and I expect Meta AI to be that leading AI assistant. Meta AI is already used by more people than any other assistant, and once a service reaches that kind of scale it usually develops a durable long-term advantage," said Zuckerberg.

He said that people don't all want to use the same AI -- instead they will want their AI to be personalised to their context, their interests, their personality, their culture, and how they think about the world.

"I don't think there's just going to be one big AI that everyone uses that does the same thing. People are going to get to choose how their AI works and what it looks like for them. I continue to think that this is going to be one of the most transformative products that we’ve made. We have some fun surprises that I think people are going to like this year," Zuckerberg said.

On a more technical bent, he predicted in 2025 that it will become possible to build an AI engineering agent that has the coding and problem-solving abilities of around a good mid-level engineer.

"This is going to be a profound milestone and potentially one of the most important innovations in history, as well as over time, potentially a very large market. Whichever company builds this first I think is going to have a meaningful advantage in deploying it to advance their AI research and shape the field," he said. "So that's another reason why I think that this year is going to set the course for the future."

As to its most recent quarterly results, Meta CFO, Susan Li said more than 3.3 billion people used at least one of Meta's Family of Apps on a daily basis in December. 

"Q4 Total Family of Apps revenue was $47.3 billion, up 21 per cent year over year. Q4 Family of Apps ad revenue was $46.8 billion, up 21 per cent on both a reported and constant currency basis," she said.

Within its ad revenue, online commerce was the largest contributor to year-over-year growth, according to Li.

"On a user geography basis, ad revenue growth was strongest in rest of World at 27 per cent, followed by Asia-Pacific (which led the empire in impression growth) and Europe at 23 per cent and 22 per cent, respectively. North America grew by 18 per cent."

Amazon

Even just two years ago, Amazon's advertising business barely rated a mention in the financial filings and investor briefings. It was there, but you had to know where to look. Now it's a core part of the business, with an annualised run-rate exceeding $US69bn. By way of comparison,  News Corp's fiscal 2024 full-year total revenues where $10.09 billion.

Within that vast number, sponsored products remain the largest portion of ad revenue, and there is continued growth potential in newer advertising offerings. According to Amazon CEO Andy Jassy, Amazon is "enhancing its advertising capabilities with tools like Amazon Marketing Cloud and multi-touch attribution models, allowing advertisers to analyse performance across various channels."

Jassy told investment analysts, "Sponsored products, the largest portion of ad revenue, are doing well and we see runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of prime video ads and we're quite pleased with the early progress and head into this year with momentum."

He also claimed the company had made it easier for brands to do full-funnel advertising with the retail media giant. "Full-funnel is from the top of the funnel with broad-reach advertising that drives brand awareness to mid-funnel, where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brand store on Amazon. To the bottom of the funnel, where sponsored products help advertisers service relevant product ads to customers at the point of purchase."

Per Jassy, "We made this easy for brands to sign up for and deploy across our growing advertising offering. We also have differentiated audience features that leverage billions of customer signals across our stores and media destinations. From Amazon Marketing Cloud's secure clean rooms, providing advertisers the ability to analyse data, produce core marketing metrics, and understand how their marketing performs across various channels to our new multi-touch attribution model that helps advertisers understand how their marketing is working."

When an advertiser uses streaming TV, display, sponsored products, and other ad types in their campaign, multi-touch attribution will show the relative contribution of each to their sales.

On the AI front, most of Jassy’s comments were related to the architecture in Amazon Web Services. There some still some interesting nuggets through. For starters, he turned down the volume on the real use of generative AI in production environments by Amazon’s customers saying, “There aren't that many generative AI applications at large scale yet.”

And he somewhat punctured the well-publicised concerns about DeepSeek by saying “We also just added DeepSeek's R1 models to Bedrock [a machine learning platform that helps users build generative artificial intelligence applications[ and SageMaker [a cloud-based service that helps developers build, train, and deploy machine learning (ML) models]."

Later, when asked about the impact of DeepSeek's achievements on Capex cost curves, Jassy weighed in, saying, “First of all, I think like many others, we were impressed with what DeepSeek has done. And I think in part, impressed with some of the training techniques, primarily in flipping the sequencing of reinforcement training, reinforcement learning being earlier and without the human in the loop. We thought that was interesting ahead of the supervised fine-tuning.”

He also described some of the inference optimisations as “quite interesting”. Inference optimisations in AI are like fine-tuning a marketing campaign to get faster, better results with less effort.

And Jassy echoed Zuckerberg's assessments at Meta that different customers are going to use different models for different types of workloads. “You're going to provide as many leading frontier models as possible for customers to choose from. And that's what we've done with services like Amazon Bedrock," he said. 

"And it's why we moved so quickly to make sure that DeepSeek was available both in Bedrock and in SageMaker, faster than you saw from others and we already have customers starting to experiment with that.”