Alphabet Traffic Acquisition Costs Hurt Bottom Lines
Michael Spencer
A.I. Writer, researcher and curator - full-time Newsletter publication manager.
All is not well in Google's parent company Alphabet.
Inspite having a stronghold on digital advertising with Facebook, referred to as the Duopoly, it's paying more in TAC costs. As it shifts from desktop to mobile, it posted a disappointing fourth-quarter earnings report, with the rising expense of reaching smartphone users.
In spite of decent holiday sales on Google Home (some were given away), Google's stock initially plunged as much as 6% in after-hours trading last week on thursday. Many believe up to nearly 6 million Google Home (mostly Minis) were sold this holiday season from October to the end of December.
Google knows it must ramp up its Cloud Business to keep up with Amazon as well; as it finds itself somewhere stuck between the past and the future. Increasingly, first mover Big Tech of the old web, need to pivot with the times.
YouTube's popularity means its smart screen when it comes out is nearly guaranteed to be a hit. Net revenue for Alphabet hit $25.9 billion, but there was a Net loss of $3.02 billion, due to one time charge of $9.9 billion due to tax changes. Why doesn't Google have a Netflix competitor?
Traffic acquisition costs (TAC) was $6.45 billion (up from $4.85 Bn.) just one year ago. TAC is what Google pays third parties so web searches can go directly to Google on platforms such as Apple or Firefox. The growing TAC could really explode from here as Apple is losing steam in the smartphone market in a serious way in 2018.
Waymo; A Rare Alphabet First-Mover Opportunity
We know Waymo is going to be big, but they still have to monetize the tech properly before competitors catch up. Alphabet is still losing nearly another Bn. in its "other bets".
The danger here is Waymo's legal battle with Uber slows down its ability to scale its AV (autonomous vehicle) program. Every month delayed, is time for the likes of automotive leaders like Ford, GM and even Uber to get more skin in the game. The battle of automated self-driving fleets is going to be epic, and it's starting as soon as 2019!
Google must ramp up its Cloud, hardware and personal assistant business. Google's cloud services are generating around $1 billion per quarter in revenue, which isn't terrible. Google is a bit tarnished with abuse of YouTube's algorithm. Google is falling on the consumer trust scoreboard, and the rising TAC fees could be a dagger in the side of Google for years to come.
Alphabet's vast majority of revenue is from Google Advertizing. This leaves it vulnerable, even with a monopoly status on referral traffic, search and Ads. Google knows it will lose advertising revenue to Amazon in the years to come. Google has to think about how can it turn its personal assistant into a kind of consumer fulfillment that's not just voice controlled computing, but more social, more like companionship.
If you are one of the companies responsible for Technological loneliness, why not be the solution to companionship with a Her like operating system of AI companionship?
YouTube Hit the Fan of Trust Decline in 2017
YouTube is facing a reckoning of trust, with increased scrutiny on how its algorithm shows content that may or may not be appropriate for the viewer. There is a ton of inappropriate content on YouTube. It's a hodgepodge and advertisers are playing russian roulette with their brand by going near it. Everyone knows this but these algorithms aren't very smart; and human editors aren't a viable solution.
For the future of Alphabet, all bets are on Waymo. As they appear to be the leader in self-driving cars; Google here has the opportunity to be the first-mover in one of the biggest new industries of our times. Waymo has incredible potential; and must explore all avenues of monetization.
Alphabet is not invulnerable, we've sort of taken Google for granted.
Google’s traffic acquisition costs grew from 22% to 24% of its advertising revenue year-over-year. That's a shocking rise. This miss of Wall Street earnings expectations for Alphabet was dramatic, and underreported.
The future is uncertain, even for big names like Alphabet.
Founder and President of Spiritual Adventure.net | Entrepreneur, writer, speaker and online teacher
6yThanks again to show us some of the highest level games going on!! This fits in the category of essential reading 😀
Member - Arab Armenian International Law Assembly
6yhttp://bewahreleben.blogspot.am/
It's such a shame Google's foray into local news doesn't incentive journalists with a cryptocurrency. Bulletin needs an altcoin. Instead of being reactive, Google needs to overcome it's political divide and put innovation and the user first again. Chinese makers are going to destroy Google's chance of being a hardware company. Google is just part of a trinity in the cloud, nothing special. Google and Facebook have to care more about consumer trust and being customer-centric, otherwise they are slowly alienating their ability to survive. The duopoly is reaching a saturation point, as the old web starts to die these companies are in big trouble. You can hire the best talent in the world, but if your long-term game plan isn't on point, what's the point?
BI Developer
6yIn a world where the duopoly, Google and Facebook bring in more than one-fifth of global ad revenue, you have to wonder at the dangers of such a mobile web. As we have seen with Facebook and YouTube, the algorithm is not just destroying journalism, it's failing people and institutions like democracy, trust in information, national defense and so forth. If Big Tech cannot lead with products that are secure, what is the point of all that reach?