[ad_1]
FILE PHOTO: A Google search page is seen through a magnifying glass in this illustration taken in Berlin on August 11, 2015. REUTERS / Pawel Kopczynski
April 30, 2019
By Arjun Panchadar and Paresh Dave
(Reuters) – Google announced Monday the slowest growth in its revenue in three years, due to increased competition in the advertising sector, the difficulties of its smartphone business and disruptive changes in YouTube, which has left his competitors behind.
Alphabet's shares fell 7.5% after working hours, placing them in the biggest one-day drop since falling 8% in October 2012. They ended Monday at a record 1,296 , $ 20.
Alphabet CFO Ruth Porat attributed the slowdown in revenue growth to currency fluctuation, competition and unspecified product changes.
Advertisers continue to pressure the company to tighten controls on its growing YouTube video service, so that they do not appear to sponsor adult content or offensive content.
Google is also striving to find the right mix of ad formats to use on mobile devices, home speakers equipped with a voice assistant and in emerging markets.
Eight of the 11 analysts who interviewed executives on Monday during a phone call raised questions about revenue issues, an unusual level of shared interest. But the leaders offered new, limited details, prompting Barclays analyst Ross Sandler to ask a question, adding that he was hitting a dead horse.
Speaking on the slowdown in sales growth, Porat said that unspecified changes on YouTube had boosted revenue in the first quarter of last year, with no comparable results having been recorded this year.
Approximately 85% of Alphabet's revenue comes from Google's advertising activities, which sell links, banners and ads on its own websites and apps, as well as those of its partners.
CEO Sundar Pichai said revenue should decline as the company focuses on the long term.
"You are going to have variations from one quarter to the next from time to time, but we remain confident about the opportunities we see," he said during a conference call.
The leading competitors in advertising spending, such as Facebook Inc., Snap Inc., Amazon.com Inc. and Twitter Inc., have all announced a quarterly revenue higher than or equal to analysts' expectations.
Alphabet said its quarterly revenues had increased 17 percent over the previous year, reaching $ 36.3 billion, about 1 billion less than the average of Wall Street estimates, according to Refinitiv's IBES data.
The company said it would have met expectations, given currency fluctuations.
Growth was the weakest since 17% in the first quarter of 2016 and 26% in the same quarter in 2018.
Facebook, the number two Internet advertising company, posted 26% growth to $ 15.1 billion in quarterly results last week. [nL3N2264UK]
"Google's advertising revenue growth is slowing under the effect of downward pressure on ad prices, especially for international market revenue," said Monica Peart, director of forecasting for the eMarketer advertising research firm.
COST INCREASE
Alphabet's quarterly costs increased in much the same way as revenues, up 16.5% from the previous year, to $ 29.7 billion.
Spending has been growing faster than revenue for much of the past two years, as it adds YouTube data centers, offices, and content licenses, affecting some investors, while the company's Privacy policies and YouTube advertising restrictions are increasingly being monitored.
More and more advertising controls on sales in the coming weeks could affect sales, Pichai said.
In the first quarter, Google's Pixel phone sales also suffered from intense competition in the high-end smartphone market, Porat said. The company is expected to introduce cheaper Pixel devices next month.
Alphabet has not yet announced any significant revenues from its spending in companies such as autonomous cars and its artificial intelligence assistant, Google Assistant.
The market share of newer units that generate significant revenue, including the consolidated hardware unit of Google and Google Cloud, which sells IT and data storage services to businesses.
And Google's costs could increase further if governments around the world take the steps that wanted to prevent apps from tracking users for advertising purposes. Other regulators have considered forcing companies to strengthen the monitoring of user content. The cost will increase in the current quarter, Google is resuming its marketing efforts, said Porat.
Alphabet's shares grew by 23% this year, as positive macroeconomic signals allowed investors to bet on this offer. But it is the weakest growth of the FAANG group, with Facebook at 48%, Netflix at 39%, Apple at 30% and Amazon at 29%.
European fine
Alphabet has, for example, fined the European Commission $ 1.7 billion for imposing anti-competitive advertising restrictions on the websites that it searches for.
Google's 3 billion users make it the world's largest seller of Internet advertising, with nearly a third of revenue, according to research firm eMarketer. Facebook is about 20%.
Taking into account the European fine, the net profit amounts to $ 6.7 billion, or $ 9.50 per share, against an average estimate of $ 7.3 billion, or 10.48 dollars per share, from analysts. Earnings excluding the fine amounted to $ 8.3 billion, or $ 11.90 per share, exceeding analysts' estimates of $ 10.61 per share for adjusted earnings.
The operating margin excluding the fine was 23%, compared with 22% a year earlier.
(Report by Arjun Panchadar at Bengaluru and Paresh Dave in San Francisco, edited by Sriraj Kalluvila and Lisa Shumaker)
[ad_2]
Source link