Google’s Dad Alphabet stated that it has reported its slowest revenue growth in three years because of increased competition in advertising. Other than that, the issues which it had faced in the past and some disruptive changes at YouTube have caused this much of a mess for this company.
Quite recently, the shares of Alphabet dropped 7.5 percent which is reported to be the biggest one since October 2012 when shares came down to 8 percent. As a matter of fact, The Company had closed Monday at a record high of $1,296.20.
Alphabet’s Chief Financial Officer Ruth Porat connected the slower revenue growth to currency fluctuations, competition and some unspecified product changes.
Moreover, it is facing somewhat of a constant pressure from advertisers to tighten controls on its fast-growing YouTube video service. Just for the fact that they are not sponsoring adult or offensive content.
Google is also facing issues in finding the right mixture of ad formats to use on mobile devices, voice assistant enabled home speakers and in emerging markets.
Bringing the sales growth slowdown into the spotlight, Ruth Porat stated that unspecified changes at YouTube had boosted the first quarter revenue only a year ago, with nothing delivering a comparable bump this year.
Apparently, about 85% of Alphabet’s revenue comes from the ad business which is being run by Google itself, which sells links, commercials, and banners across its own websites and apps and those of its partner.
CEO of Google, Sundar Pichai said revenue slowdowns should be expected as the company focuses on the long term. “You are going to have quarter-to-quarter variations once in a while, but we need to stay confident about the fourth-coming opportunities,” he said on a conference call.
Competitors like Facebook, Twitter, Snap, and Amazon.com all reported their respective revenues above or line with analysts’ expectations.
On the other hand, Alphabet said that its quarterly revenue rose up to 17% from a year ago to $36.3 billion, which is about $1 billion short of Wall Street’s average estimate, as per the IBES data.
The growth was the slowest since 17% in the first quarter in the year 2016 and compared to 26% for the same quarterback in 2018.
Just last week, Facebook which is currently the No. 2nd Internet ad company, posted about 26% growth to $15.1 billion in quarterly results, which is not a good news for Google and Alphabet.
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Rising Costs
Alphabet’s quarterly costs rose about the same as its revenue, which rose up to 16.5 percent from last year to $29.7 billion.
Expenses have increased way faster than revenue for much of the past two years as it adds up some data centers, offices, and YouTube content licenses. These increased expenses have been concerning some investors on the company’s privacy practices and the advertising restrictions on YouTube.
On the other hand, the sales of Google’s Pixel smartphones also struggled from obvious intense competition in the premium smartphone market. Keeping that in mind, Porat said that we are expecting to introduce lower-priced pixel devices from next month.
