How much of Alphabet’s revenue comes from haram?

Alphabet is the parent company of Google, the world’s most widely used search engine.

In addition to Google, Alphabet owns Android, Youtube, Waymo, and several other technology companies.

Alphabet earns its revenue from the following revenue sources:

  • Google Advertising:

Includes revenue generated from advertising services through Google.com, Gmail, Google Maps, Google Play, and Youtube.

  • Google Other:

Includes revenue generated from Google Play, including App sales, in-app purchases and digital content sold in the Google Play store.

In addition, the Google Other segment includes revenue generated from Google Nest home products, Pixelbooks, Pixel phones, and other devices, as well as YouTube Premium and YouTube TV subscriptions and other services.

  • Google Cloud:

Includes revenue generated by Google’s infrastructure and data analytics platforms, collaboration tools, and other services for enterprise customers.

  • Other Bets:

Includes a combination of multiple operating segments that are not individually material to Alphabet’s overall revenue.

Other Bets’ revenue is primarily generated from internet, licensing, and R&D services.

The contributions from each of Alphabet’s revenue segments in their 2020 annual report were as follows:

An area of concern for Practical Islamic Finance is revenue generated from advertising (if the product/service advertised is haram.)

Given Google owns nearly 90% of the search engine market, it is a certainty that it earns some money from advertising haram products; the only question is how much?

Determining the exact share of revenue coming from haram advertisements is extremely difficult since Alphabet does not provide advertiser-specific breakdowns of its revenue.

Given over 80% of Alphabet’s revenue comes from advertising, Practical Islamic Finance suspects if Alphabet were to stop advertising haram products/services, the impact on its revenue would be material.

Practical Islamic Finance concludes:

A material portion of Alphabet’s revenue comes from haram.

Does Alphabet rely on interest to operate?

Year-to-Date
for period ended
6/30/2021
Fiscal year
ended
12/31/2020
Fiscal year
ended
12/31/2019
Interest Income $734,000$1,865,000$2,427,000
Total Revenue$117,194,000$182,527,000$161,857,000
Interest Expense $152,000$135,000$100,000
Total Expenses$81,396,000$141,303,000$127,626,000
Interest Income / Revenue0.63%1.02%1.50%
Interest Expense / Total Expense0.19%0.10%0.08%
*Numbers in thousands, U.S. dollars

Practical Islamic Finance concludes:

Riba is used but not relied upon in Alphabet’s operations.

What is Alphabet’s Environmental, Social, and Governance (ESG) impact?

Environment

According to Google, the company’s operations have been carbon neutral since 2007.

In addition, in 2020, Google neutralized its legacy carbon footprint since its founding, making it carbon neutral for its entire operating history.

Social

Google has an impressively high Glassdoor rating of 4.5 out of 5.0 from over 24,000 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.

Governance

In October 2020, the United States Department of Justice filed an antitrust lawsuit against Alphabet, alleging that Google uses anti-competitive practices to preserve a monopoly in online search.

Alphabet is engaging closely with the Department of Justice to resolve these allegations. 

Given Alphabet’s fundamentally beneficial lines of products, some of which it offers completely free such as G-suite, Google Maps, and Gmail, provide significant value to small businesses, educators, and the general public; Practical Islamic Finance is willing to give Alphabet the benefit of the doubt so long as systemic causes for unethical behavior have not been identified.

Practical Islamic Finance concludes:

Alphabet has a net positive ESG impact.

Comfort Rating

From Alphabet’s business, financial, and ESG reviews, Practical Islamic Finance rates Alphabet stock as:

Uncomfortable to invest in from a Halal perspective.

Justification for our rating

While Alphabet has substantially enhanced the convenience of many of our lives, and much of what Alphabet does is positive, PIF estimates the revenue contributions from advocating for and advertising haram products to be material to Alphabet’s bottom line.

Consequently, Practical Islamic Finance is Uncomfortable investing in Alphabet from a Halal perspective.  

Sources

Alphabet 2020 10-K

Alphabet Q2 2021 10-Q 

Google 2020 Environmental Report 

Search engine market share worldwide 

Justice Department Hits Google With Antitrust Lawsuit 

Google Reviews 

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