
Alphabet Announces Second Quarter 2019 Results [pdf] - mrep
https://abc.xyz/investor/static/pdf/2019Q2_alphabet_earnings_release.pdf
======
11thEarlOfMar
Revenue is up 19%.

Net income up >300%.

Most of the revenue and profit from ads.

Stepping back for a minute, political polarization has be increasing for about
the length of time that Google has been in business. I'm not claiming Google
is the cause, but rather that Google's tenure is a proxy for an acceleration
in political polarization. [1]

Polarization enables outrage. Think Antifa vs. Proud Boys. Pelosi vs. Omar.
AOC vs. ICE. Outrage reduces the amount of critical thought people put into
the information they see and use to draw or reinforce conclusions they have
about other groups, in particular, their polar opposites.

Outrage drives clicks, shares, likes and retweets. Clicks, shares, likes and
retweets drive views, views drive ads, ads drive revenue.

Now, toss neural nets into the cycle. Neural nets do in fact learn and improve
as feedback loops transpire.

Why wouldn't we expect these systems to learn that among other things,
information that increases polarization results in the desired goal of
increasing revenue, absent of any deliberate intervention by human beings?

[1] [https://www.allsides.com/blog/political-polarization-
america...](https://www.allsides.com/blog/political-polarization-america-two-
fascinating-charts)

~~~
asdfasgasdgasdg
> Why wouldn't we expect these systems to learn that among other things,
> information that increases polarization results in the desired goal of
> increasing revenue, absent of any deliberate intervention by human beings?

This is all well and good, but revenue is not an input to most machine
learning algorithms at Google. First off, there is a pretty serious firewall
between search and ads, so any organic results will be completely oblivious to
revenue. Search systems literally do not have access to that kind of
information. Even within ads, the concept makes sense only if you don't think
about it too much. The big money-maker ads are when someone is trying to buy
something. Ads around viral content are just not something that people can pay
much for, because the margins in the news business are very thin.

Now if you want to make an article that the _media_ has learned that spectacle
and outrage drive clicks, I am _here_ for it. (But this has always been true.
Yellow journalism was a thing more than a century ago.) And I guess you can
make an argument that Google facilitates this by pointing you to the media,
and by participating in the feedback loop. But I don't think Google revenue is
as causally linked to outrage as you seem to believe. After all, correlation
usually doesn't indicate causation.

~~~
steve19
I might be wrong but I was definitely told by a YouTube rep that videos that
makes more revenue get promoted more on the platform. It's not the only
signal, but it is a signal.

~~~
chris11
My thought is that there's a correlation between attention and a viewer's
willingness to spend money that can be seen without directly looking at
revenue. For instance, letting a music playlist run would look a lot different
than watching a video I'm actively paying attention to. Or a detailed
discussion on credit card churning would probably be more niche than a clip
from SNL. But former would probably have a more engaged audience and be more
willing to act on an advertisement for a credit card. So if you're optimizing
for user engagement, you'll probably increase profit.

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Despegar
>On July 24, 2019, the Board of Directors of Alphabet authorized the company
to repurchase up to an additional $25.0 billion of its Class C capital stock

The reason the stock is up so much. They're going to stop blowing money on
stuff they aren't good at.

~~~
snarf21
EDIT: Apologies, I was incorrect in this assumption

We need to solve this by requiring all repurchases to be with post tax money.

~~~
koolba
It is post tax money. Only difference from a dividend is avoidance of double
taxation by shareholders as value goes up.

~~~
singron
Just to be perfectly precise, dividends are usually taxed as income, but an
increased valuation as a result of a buyback would only be taxed as capital
gains when the shares are sold.

If there weren't a separate capital gains rate, then the only difference would
be the tax would be collected when the shares were sold rather than when the
dividend was issued.

However, if you had the intention of reinvesting your dividend, then you would
buy new stock with post-income-tax dollars, whereas a buyback would increase
the value of your stock holdings without using your own post-tax money.

~~~
vonmoltke
> Just to be perfectly precise, dividends are usually taxed as income

Who is usually getting unqualified dividends? Qualified dividends are taxed as
capital gains.

~~~
singron
Good point. I got the two flipped in my head, but I think the rest of the
comment applies.

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MarkMc
Incredible that Google has been able to sustain almost 20% revenue growth for
so long - much longer than most people expected.

For the past 6 or 7 years people have been predicting that Google's growth
would soon slow because:

(a) The number of ads on a search result page had reached saturation point

(b) The percentage of people using the internet in rich countries had reached
saturation point

Although real, these effects have proved to be outweighed by other, less
limited factors of growth; in particular Google's ability improve the quality
of match between advertiser and user. Even now I think there is significant
room for Google to improve this matching - eg. when I put an iPad Pro in my
online shopping basket at apple.com but don't buy it, why don't I then see
iPad ads on YouTube? When I give Tesla $1,000 to reserve but not buy a Model
3, why don't I then see Model 3 ads reading The New York Times? Apple and
Tesla are leaving money on the table, and when they wake up Google will make
even more money.

~~~
bduerst
With your example, why would Tesla advertise to you _after_ you have already
converted on a purchase?

In fact, Tesla can use your email address on a negative audience list when
advertising on display networks that hit publishers like NYT. I wouldn't be
surprised if Tesla was doing this to optimize their ad spend.

For purchases where you _are_ retargeted, that's because when you buy
something, you're a magnitude more likely to purchase it again (i.e. as a
gift, have a backup/travel one, etc.). Goods like automobiles are an exception
here, unless you're in the business of buying multiple cars in the same month.

~~~
MarkMc
Sorry I wasn't clear - I haven't committed to purchasing a Model 3, I've
simply given a deposit to reserve my place in the queue when they start
shipping to Australia in August. I'm still not sure whether to pull the
trigger now - I'll probably wait until better self-drive features become
available, or may even decide not to purchase it and instead ask for my
deposit back.

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mykowebhn
I find it interesting that income more than tripled compared to the previous
year's quarter, but their effective tax rate dropped from 24 percent to 18.

~~~
tsunamifury
Why is that interesting? Corp tax rates are flat, not progressive and there
was a significant change last year.

~~~
Ididntdothis
Progressive corporate taxes seem like a good idea to discourage companies from
growing too big.

~~~
dgellow
Why would we want that? Does anyone want to discourage companies from growing?

~~~
addicted
I don't get this.

Who thinks "I made $61 after tax profit on the last $100 of profits but I will
only make $59 profit on the next $100 so I'm gonna chooAe to not make that $59
after tax money.

This is a genuine question. Is there any research or evidence that shows that
increasing taxes on profits (which is what corporate taxes are) reduces pre
tax profits in the US (I'm restricting to the US because it's possible other
places have had more ridiculous njmbwrs, even leading to greater than 100%
taxes). This isn't a rhetorical question.

The same applies to progressive income tax, but I know someone who actually
did choose to forego additional income but it waS someone who didn't
understand progressive taxes and thought the headline figure apuwd to their
entire income instead of the marginal income.

I'm assuming reasonably sized companies aren't that stupid.

~~~
joshuamorton
I tend to agree with you.

To play devil's advocate, assume you are Google or Apple. You have (quite
literally) 100 Billion dollars in cash equivalent securities sitting around.
You could do what amazon does and reinvest those into the business, but there
is risk, and decreasing returns on that. Alternatively, you could just invest
that money (in which case its not profit, so taxed differently, I believe), or
you could pay your employees more.

Those second two are, in the long run, potentially worse for investors. Is
that good or bad? Unclear. Is that even how the calculus works? Unclear. Is
this line of reasoning obviously wrong? No.

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samfisher83
Its kind of funny how they just added a European Commission fines row on their
income statement.

~~~
avocado4
I can't help but think that EU situation has helped Google. A flood of new
regulation just keeps entrenching them by killing off any potential upstarts
that could compete in Europe.

~~~
cameronbrown
Isn't this the argument free-marketers have always made? The people who said
GDPR would stifle competition? It will be a long time before the outcome of
these choices are obvious.

~~~
d1zzy
And they wouldn't be wrong about that.

Note that the 2 main arguments and counter arguments: it helps protect
people's information vs it increases the barrier of entry are NOT exclusive.
Both can be valid at the same time and I believe that in many regulations they
are both valid. That's how life works, a chain of compromises.

~~~
jklinger410
What are some examples of GDPR increasing barriers to entry?

~~~
kev009
Trivial example but the nekochan community for SGI retrocomputing shut down
because of it. It's particularly hard for small business or unprofitable
things done for fun/sport/public benefit.

~~~
scrollaway
I've seen many people shut down their side projects citing gdpr. Without fail
it's always people who haven't really researched the impact gdpr has on them
and they didn't really want to keep the project going anyways so it's more of
an excuse to shut it down without facing backlash.

~~~
kev009
It seems like you are contorting the blame to "well you should just do more
work!" Bureaucratic regulations have costs in implementation, enforcement and
non-compliance. Those costs are naturally easy for corporations to absorb
because they can hire people to do it full time or whatever the case may be.
Maybe several hours or $1000 for a lawyer or whatever to review some
regulation are a bridge too far for someone already devoting time and dealing
with whatever negatives the side project is coupled with like less free time,
negative users/customers/competition, and other opportunity cost.

So yes, taking on new and unknown (to the creator) legal liability from some
regulation is a great reason to shut down a side project.

~~~
ryandrake
If you’re a hobby project or small business that’s already not collecting
customers’ personal information, then what hard work do you have to do to
comply with GDPR?

~~~
cameronbrown
An IP address counts as personal data, so that means you can't use any PaaS
without having a privacy policy and vetting your platform's policy (which
requires legal skills), just because they might keep the logs.

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dvduval
Paid Click revenue up, revenue per click down. Does this indicate we are
seeing more ads? More quantity, less quality? Hmmm...

~~~
adamt
There's many factors at play here, but note that the majority of Internet
subscriber growth is in developing countries.

As the spending power of the average Internet user decreases, then CPC/CPM
naturally falls with it.

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haberdasher
107K employees

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HugThem
Is that $5B fine deductable from taxes?

~~~
criddell
That would make a $500 million dollar difference so in the end, it doesn't
really matter.

~~~
djakjxnanjak
I love it. Everyone’s claiming a $5 billion fine is insignificant, so there’s
no room to argue the tax savings from writing it off is meaningful.

~~~
criddell
I think it's true though. In part it's because the fine is small but the
bigger part is their tax rate is absurdly low.

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person_of_color
One day SWE3's are going to be taking home 7 figs in their first year.

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plg
What proportion of their revenues comes from ads?

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shmerl
Do they publish Google Fiber results?

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nkg
Here is the most interesting sentence: "Prior period results excluding the
effect of the European Commission (EC) fine of $5.1 billion have been included
to facilitate comparison to current quarter performance".

~~~
ocdtrekkie
Honestly, the trippiest thing to me, is that European Commission fines being
marked as an ordinary expense line (and likely one that will be used more in
the future), they really are making it clear that violating the law and paying
the fines for doing so is really just part of ordinary business to them. And
obviously, the fines clearly aren't punitive enough to encourage them to
revise this behavior.

~~~
rubyn00bie
This is literally textbook how-to-do business, if the fines are smaller than
what you earn from doing it, you keep doing it because it's profitable.

It's why Facebook's $5bn FTC fine is laughable too. You need to fine them an
amount relative to their market capitalization to really make 'em feel it,
probably around 10%. I'd go as far to say, one would need fine them in the
$50-$100bn range to really stop them from doing something (same for any of the
$500bn+ companies).

If it's profitable to be shitheads, they're are going to account for it, and
be shitheads.

~~~
utopcell
FB's net profit for Q2 was $1.6bn. Close to a year's profits were wiped out
from this fine, which is roughly 1% of Switzerland's GDP. I don't see how this
is laughable.

A fine of 10% of market cap is close to the company's gross revenue. This is
equivalent to a government owning the company. This "smells" like communism
mentality.

~~~
rubyn00bie
How is fining them an amount large enough to deter their behavior communism?
Full stop, how?

What you're saying is that fines large enough to actually affect the company,
to make their shareholders realize a loss of (monetary) value as a result of
bad management, is communism?

That to me is simply insane, and I'd highly encourage you to go take some
upper division economics courses before rattling off what is and isn't
communism.

~~~
utopcell
It's quite simple:

1\. FB's market cap is $573bn. 10% is $57.3bn. 2019 Q2 profits were $1.6bn.

2\. By your standards, it is perfectly fine for a government [entity] to tell
a private company: "If you don't do exactly as I ask, I will get all your
profits for roughly the next decade." That, according to you, would be
teaching FB "good behavior." To quote you, it will "really make 'em feel it".

3\. Communism is a system of government in which the state plans and controls
the economy and a single -- often authoritarian -- party holds power.

Maybe you should rethink your views.

~~~
ocdtrekkie
I mean, I think the parent's position is generous, considering what I think
many others would agree would be fair: That a company that has wronged a
country's citizens as deeply as the Facebooks and Googles of the world have
should simply be terminated, executives jailed, and assets seized and either
auctioned or redistributed. For companies built on societal harm, they should
have to fight for their lives to remain in business.

If we want these sorts of businesses/behaviors to stop cropping up, we need to
make societal harm a huge risk factor for investors.

~~~
utopcell
Sure. Some may even find your stance too sympathetic. There are countries
where, today, executives would be jailed or executed for the harm they've
brought upon their users. Such insane views are the norm for other countries,
but not for a democratic country like the US. What was FB's crime again, that
deserves for it to be wiped off the face of the planet ?

Of course it is perfectly fine and within your rights to believe and say that
the world would be better off without FB (and Google no less!) but you must
understand by now that your opinion is that of a tiny minority.

To answer in good faith however: I do agree with the spirit of what you are
saying. Companies should be held accountable and fines are probably a good
tool to achieve that.

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jpm_sd
Other Bets operating loss: ($989) [million]

Almost a Billion dollars per quarter!? Put them out of shareholders' misery,
already!

