
Alphabet slides 5% after missing earnings expectations on revenue of $20.3B - pearlsteinj
http://techcrunch.com/2016/04/21/alphabet-slides-6-after-missing-earnings-expectations/
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tma-1
Long-term, I am not very bullish on Google/Alphabet. More than 90% of their
profits come online advertising, something that can be easily blocked for life
with a simple browser extension/plugin. Some worrying figures[1]:

* US ad blocking grew by 48% to reach 45 million active users in 12 months up to June 2015.

* Ad blocking grew by 41% globally in the last 12 months.

* US ad blocking grew by 48% to reach 45 million active users in 12 months up to June 2015.

[1] [https://blog.pagefair.com/2015/ad-blocking-
report/](https://blog.pagefair.com/2015/ad-blocking-report/)

~~~
rhino369
>More than 90% of their profits come online advertising, something that can be
easily blocked for life with a simple browser extension/plugin.

If I were Tim Cook, I'd be at least a little tempted to update iOS and OSX to
include adblocking on by default.

~~~
bobdole1234
The Google infrastructure now powers a chunk of icloud.

I don't see apple killing the revenue stream that feeds their bottomless pool
of capacity.

~~~
threeseed
Apple has been rumored to be moving away from cloud providers for a while now.

Have been wondering for a while they are building an internal cloud e.g. using
FoundationDB acquisition as their DBaaS.

~~~
srunni
The Information recently reported on Apple's cloud efforts. They don't seem to
be going well:

 _Infighting Slows Apple’s Cloud Engineering Efforts_ :
[http://go.theinformation.com/2c8e01](http://go.theinformation.com/2c8e01)

> Two engineering teams working on new internal cloud-computing infrastructure
> to power Apple’s Web services are in open conflict, the people say. Already,
> the infighting has sparked at least one key employee departure, with more
> expected soon.

 _Inside Apple’s Cloud Infrastructure Troubles_ :
[http://go.theinformation.com/d716c4](http://go.theinformation.com/d716c4)

> Despite years of trying, Apple has failed to develop infrastructure to
> handle traffic for its Internet services, which include iTunes, Apple Maps,
> iMessage and backups of images and videos stored on the iPhone.

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jhulla
Alphabet isn't the only big corp down after hours today.

As of now:

Microsoft - down 5%.
[http://www.marketwatch.com/investing/stock/msft](http://www.marketwatch.com/investing/stock/msft)

Visa - down 4%
[http://www.marketwatch.com/investing/stock/v](http://www.marketwatch.com/investing/stock/v)

Starbux - down 4%
[http://www.marketwatch.com/investing/stock/sbux](http://www.marketwatch.com/investing/stock/sbux)

In each case, the cause is different. But one thing is common, trailing PE
ratios of all four are high compared to historical norms. High PE ratios are
maintained with high growth in revenue, earnings and margins. Back off even a
bit and the invisible hand smacks you in the face.

~~~
not_that_noob
Upvoted for the funny Adam Smith reference.

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educar
So, Google makes fantastic products. Much of our online interaction involves
Google in some way or the other. And the only way these guys have figured to
make money is ads.

Why can't they sell products and be like an Apple, Oracle, Microsoft. I am
guessing it's too much work to grow in such a massive pace without ads. Ads
are a marketers/sales persons dream and these marketers are very likely to
spend money.

This ad economy is so very sad and it's killed many nice things. Everyone is
just giving out things for free and nobody wants to pay for anything thanks to
this whole ad economy. News reporting has gone to the dogs because nobody
wants to pay. Email will no see decent progress thanks to gmail.

Anyway, I feel Google will be a much better company if it can get rid of
dependence on ads but I guess it's too late now since it has to answer to
shareholders and show never ending growth.

~~~
kumarm
>>Email will no see decent progress thanks to gmail.

I remember how great email was before GMail:

1\. Every few days I had delete emails so that I can get new email.

2\. Delete sent mail immediately to make space for new emails.

3\. More than 50% of emails received are spam.

Yeah right GMail was one that stopped progress of email :)

~~~
educar
As I noted, Google makes great products including gmail. My point was that
with gmail being free and good enough, there is nobody to compete with gmail.
In 2016, nobody will start an email company even though there are lots of
advancements that can be made.

~~~
endtime
It was acquired and shut down, but
[https://www.mailboxapp.com/](https://www.mailboxapp.com/) was a thing
recently.

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tyingq
_" Paid clicks for Google were up 29 percent year-over-year for the first
quarter"_

I'm amazed this trend continues. Page views almost certainly were NOT up 29%
yoy. Meaning that clicks are growing faster than page views, in a big way,
every single quarter, for years.

That's what sets the investor expectations, but I don't see a way this trend
continues forever. There's only so much room for additional ads, ad
optimization, etc. At some point, you're as optimized as you can be, and
growth becomes solely driven by pageviews.

~~~
mmanfrin
I imagine part of it is explained by the fact that when I did a search on a
mobile device, _nearly 90% of the front fold_ was ad.

[http://i.imgur.com/S5nClc4.png](http://i.imgur.com/S5nClc4.png)

~~~
adevine
Yeah, Google has really been expanding the real estate given to paid ads vs
natural search results. My guess is they've seen a big shift from natural
results to paid results. At some point, though, people will start to believe
the value of the search page has suffered.

~~~
vgeek
For the last ~2 years Google has been rolling out changes slightly before
earnings are released each quarter. For example, the yellow Ad label a few
months ago, and it is likely to switch to Green to blend in with the
Advertiser's Display URL.

Last week Google Maps Ads switched status from being in Search Partners to
being included in ALL AdWords campaigns with Location Ad Extensions. Now
Google is displaying ads in Map search results. There are also 4 results on
top, 3 on bottom with no sidebar, this reduced inventory in an attempt to
drive up CPCs. I've seen CPCs increase 10-15% because of this over the last
month. There are also queries that return 7 paid results and only 9 organic
results.

Google isn't innovating, they're just making ads appear as similar to organic
results as humanly possible (if you're a webmaster, you'll get penalized for
this) and making sure ads are everywhere possible. Baidu's results have paid
listings interspersed without labels, which is what Google is on track to do
within 2 years. They're great at equivocating. They penalize sites that build
links, yet they themselves send emails soliciting KW heavy anchor text to Play
vendors. They'll also look the other way if you're a Google Ventures funded
company caught blatantly "spamming", a la Thumbtack and Nest.

Mobile CPCs are still roughly 30% lower than desktop, but it doesn't convert
nearly as well, so it is worth less. As already mentioned, Google isn't
growing search volume, rather increasing the number of ads they're showing, so
say 7 ads per page on 1st, 2nd and 3rd pages of results, versus 13 on 1st page
and 3 on 2nd, none on 3rd. If your organic results just happen to get worse,
users have to dig deeper into the SERPs to find what they're looking for,
while also driving an increase in impressions.

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jerryhuang100
GOOG/GOOGL's 'other bets' revenue is more than doubled yoy, though they spent
27% more yoy ($657MM just for Q1!!) for their 'other bets' operation.

~~~
ASinclair
Fiber infrastructure is expensive.

~~~
pavs
Did they invest a lot on fibre infrastructure? There are only in a couple of
smallish cities and towns and most of their service deployment is based on
existing infrastructure, AFAIK. Maybe I have missed something...

~~~
adventured
They're tracking to spend upwards of $3-$3.5 billion in 2016 on Google Fiber.
They're likely spending a fair sum on infrastructure as well as everything
else.

(from Q4 2015)

"In the earnings announcement this week, Alphabet (the parent company of
Google) shared that most of it’s $869 million in capital spend on “Other Bets”
went to Google Fiber, according to CFO Ruth Porat, and that Google Fiber would
continue to be a driver of CapEx spending going forward."

[https://abc.xyz/investor/news/earnings/2015/Q4_google_earnin...](https://abc.xyz/investor/news/earnings/2015/Q4_google_earnings/index.html)

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pmyjavec
I wonder if other search engines are also starting to catch up?

I've been using DuckDuckGo for a while now and there was a time when it felt
like I was missing out; However the product has improved dramatically of late
and forget I'm no longer using Google.

~~~
petra
Its hard to believe, because tracking and especially tracking over search
history both over the immediate term and the somewhat longer term is exactly
what enables Google to surface such good results.

~~~
pmyjavec
I understand the theory behind all that but I'm preferring the results DDG is
now giving me. The bangs feature is also really nice.

I actually used DuckDuckGo about a year ago but I went back to Google after a
month as the results felt crap, but I gave it a try recently and haven't
looked back.

I haven't felt this was since leaving Altavista!

~~~
cpeterso
DuckDuckGo's results have definitely improved over the last year. I now prefer
DuckDuckGo's SERP UI over Google's and really like the !bang searches. I only
need to use Google (!g) when looking for some very technical or recently-
crawled pages.

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randomname2
How did they miss earnings, after buying back $2.3B of stock in Q1?

~~~
losty
The two are unrelated. They could spend all their cash on buybacks and the
earnings would be the same.

~~~
ucha
Earnings are reported per share so stock buybacks are actually a pretty common
way to make earnings look better. Of course, it doesn't change the total
earnings but the number reported by techcrunch would indeed change.

~~~
jonknee
The analysts making EPS estimates know about the buybacks too and increase the
EPS to compensate.

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simcop2387
> The company posted earnings of $7.50 on revenue of $20.26 billion, while
> analysts were expecting earnings of $7.96 on revenue of $20.38 billion.

I'm assuming they mean 7.5 billion, and 7.96 billion respectively but if they
aren't then it seems that they should check the couches in the offices.

~~~
brandoncarl
Earning per share....

~~~
simcop2387
Thanks. I'm not that up on how things like this are usually reported, so it
looked odd to me.

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dimino
Oh no, they only brought in the GDP of the country of Nepal.

Fire everyone.

------
dendory
It's interesting to see how Google, a company that has arguably some of the
best engineers in the world and the most brilliant technologists, still only
makes a decent revenue on online ads. All of their other startups are losing
money.

~~~
ryanobjc
Why, you're right - somehow another $20b a quarter business has eluded them!
They're normally just all over the place, I have a few in my couch at home. So
weird.

And yeah, all those other 'bets' \- losing money. New things are usually
immediately hugely profitable, and even thinking about trying something that
doesnt make huge bank right out the gate makes 0 sense.

This is in stark contrast to winning companies such as Microsoft, Intel, AT&T,
Exxon (and any other oil company), which have all figured out how to get those
$80b/year businesses bootstrapped, not to mention who have significantly
diversified their revenue from their original business lines!

~~~
MikeHolman
I assume you're being sarcastic, but Microsoft has done a pretty good job
diversifying. Office, Windows, Azure, SQL, Surface, Xbox, even Bing contribute
significantly to the bottom line.

~~~
f2f
and every single one of those was profitable from day 1!

