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Google parent Alphabet sees a worrisome slowdown in online advertising

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Google’s parent-company Alphabet reported first-quarter earnings Thursday that fell short of analysts’ expectations as advertising revenue slowed more than Wall Street had expected.

One of Alphabet’s most important metrics — the cost it gets paid each time a consumer clicks on a Google search link — fell 9 percent in the first quarter. That drop sent the company’s shares tumbling about 5 percent in after-hours trading. Facebook, which also relies on advertising, saw its shares fall by 1.5 percent after hours.

Overall, first quarter revenue rose 18 percent to about $16.5 billion, the company said. That fell slightly short of the $16.6 billion that analysts polled by Bloomberg had projected. Net income came in at $7.50 a share, short of the $7.96 projected by those analysts.

The earnings report was the second since the company renamed itself Alphabet and reorganized to better assess which divisions had potential to return a profit. Some of these “other bets” include self-driving cars, Nest, which makes smart thermostats, and biotech subsidiary Calico, which is trying to figure out how to extend human lifespans.

Alphabet, for now, appears willing to take on losses at these experiments in the hopes that they will one day blossom and diversify a company that primarily relies on advertising. Together, these and other entrepreneurial efforts brought in $166 million worth of revenue, but ran at an operating loss of $802 million.

However, revelations that growth is slowing in its main business worried investors.

“The core business is what supports the company,” said Rob Enderle, principal analyst at the Enderle Group. “All of the other stuff just seems to be consuming resources.”

Google still dominates the world of online advertising, controlling a third of all worldwide digital ad revenue in 2015, according to research from eMarketer.

Mobile is key to staying in that position going forward — and Google’s popular Android mobile operating system has helped ensure it has access to that market. But it has also earned the company regulatory scrutiny. On Wednesday, the European Union announced formal antitrust charges against the tech giant, asserting that Google’s agreements with device-makers were aimed at unfairly promoting its services over rivals.

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