Alphabet slides 5% after missing earnings expectations on revenue of $20.3B
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* 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.
actually, it looks like this may be the first quarter where their non-advertising revenue was over 10% of their total revenue. $2,071 out of $20,091 (in millions). Growing 24% YoY isn't too shabby, either.
It's very rare that I search for a product and even then, chances are that I add "review" or "sucks" (can work fine in combination with a specific product; negative reviews often tell you more about a product than positive ones, just like a requirements document or a product road map becomes a lot better if one includes things that people might the product to do that it will not do)
Usually, the companies whose ads I'd want to click on rank high in the organic search results, anyway.
Heck even creating a credible enough rumor that blocking google search ads seriously degrades results could have a material impact.
If I were Tim Cook, I'd be at least a little tempted to update iOS and OSX to include adblocking on by default.
1) It would create a bad product, according to Google's own prior statements on the matter.
2) It would encourage government authorities to look even closer at potential abuses toward consumers (ie what kind of consumer harm is occurring, if any, when a monopoly search provider prevents attempts by consumers to use ad blockers; that would have to be resolved legally). European authorities would likely pounce on such a move immediately, looking for any opening by mistake to go after the company, given how they've handled Google thus far.
I don't see apple killing the revenue stream that feeds their bottomless pool of capacity.
Have been wondering for a while they are building an internal cloud e.g. using FoundationDB acquisition as their DBaaS.
Infighting Slows Apple’s Cloud Engineering Efforts: 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
> 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.
Apple is the most profitable company in the world and consistently takes almost all of the profit in the smartphone industry. They also make a large portion of the profits in the PC world despite their relatively meager market share. Does Apple really want to expand into the sub $200, or even $100, smartphone market? Unless they do, I don't even really see Google/Android as their competitor.
I know it can be short sighted to base things on personal anecdotes, but while I don't use an iPhone myself, almost all of my friends do and they extensively use Google products ranging from Gmail, Maps, Photos and search.
Apple seems to have the best of both worlds in the current situation. They dominate the high end profitable hardware market and their users still get to benefit from Google products if they so choose. I'm not convinced that Apple would be better off if Google disappeared. Replicating all those services will be expensive.
Granted, this only matters in the scenario in which their online advertising business contracts meaningfully (whether due to ad-blockers or otherwise). If ad-blockers gain usage at an accelerating pace, Google is unlikely to have much time to diversify (and that takes a long time when you're talking $20b in sales to off-set).
So far Google has been flaky, disorganized and unprincipled about developing other real businesses. They should have a dramatically larger cloud services business for example, but they handled that incompetently and ceded years and tons of ground to AWS.
Essentially Google has to spend the next several years praying that ad-blockers don't rapidly bring their spigot of online ad dollars to an end. That's a real bad position to have put yourself in if you're a $536 billion corporation.
This was pretty liberating because before "native" ads I felt a pang of guilt for blocking ads.
If Google wants to stop ad blockers they should hide sites that use these obnoxious "native" ad networks.
This would instantly and Google in court for anti-competitive practices...and rightfully so. Imagine if Google suddenly said, "we are going to punish any publisher that doesn't use Adsense within organic search listings." Holy cow that would be bad, and the scary part is that Google could easily do this without even announcing it.
Sorry other allegedly acceptable ads, but I don't need trashy clickbait at the end of every news story so you all lose out.
I think they are very serious about becoming the market leader in this space. They are behind AWS, but if they can leverage the same technology that they use internally, they will have a compelling offering.
But okay, I guess you must know better.
Would be nice if someone would cater for Startup owners that do not have time to study documentation and overlook multiple processes just to run a simple bot etc.
If only there were cloud products and services that were dead simple and just did one little useful thing just the way you wanted it.
If only ...
You know what, I think I will!
What should I call it ?
I got 300$ in credits on every google account when I first vistited which allowed me to play around with their big data stuff and some public datasets, which was nice.
I know, I know, AWS and Google Cloud is not DO and I agree. But would it hurt to introduce DO or Vultr style UX and make it easier for regular user to launch what he wants without all the expert language and need to jump in to documentation for hours?
Would button "Simple" and "Advanced" UI be really that hard to make?
I, as startup owner, dont really have time to focus on all the noise from large cloud providers, its easier to just launch 5 VPS with DO or Vultr and create my own infrastructure. And while I grow I doubt I will move my business to any of the cloud providers because I dont have time for it. Its easier to just build infrastructure on VPS's for $5 or just go for dedicated servers for backend.
God, I wouldn't want to be on the record saying that. People used to say things like this about web search too.
Some products take a while to build, especially when dealing with less-than-friendly .gov regulators.
But the big opportunity is that they could offer you a car-as-a-service for much less than the current cost of a car. Today's cars are unused most of the time, so if we'd replace them with such a service, we'd need significantly fewer of them, thus reducing the cost.
Self-driving changes quite a bit about cars. If accident rates can be low enough, they don't need as much conventional safety measures; air bags, metal armour that crumples, etc. Less weight there means lower fuel costs. The way they drive should mean lower maintenance & fuel costs compared with human drivers.
One major point against it is that even though self-driving cars may be here soon, none of us will live to see the day when manual driving is banned. Especially not in the freedom-happy US.
A second major counterpoint is that even in this fascist dictatorship where manual driving is banned, external factors (large wildlife, sudden slippery ice, human error in vehicle maintenance, etc.) will still cause serious accidents.
The third major counterpoint is: say you reduce accident rates by two or three orders of magnitude (which would be huge). Still, a tiny tiny fraction of people would end up in accidents. What society would be OK with saying "Oh, screw it, let those people die so manufacturers can build cheaper cars"?
There are set to get self-driving taxis before the end of the year there. And you already need to bid on a pricy permit to operate your own car. (Certificate of Entitlement. A ten year one goes for more than 50k SGD.)
There is no hope of that happening. You're never going to convince people to remove safety features, and even if you could, a car that has 5% as many collisions but logs 50 times as many miles would justify more safety features because there will be more collisions per vehicle despite there being fewer collisions per mile.
> The way they drive should mean lower maintenance & fuel costs compared with human drivers.
All of that sort of thing will be dwarfed by not having to pay a human driver. But in a competitive market it will also be eroded by competition. A cab ride that used to be $20 will soon be $2 because now $2 can turn a profit.
On the other hand, if it now costs $2 instead of $20 then people will start using hired cars instead of owning cars and then you might make a lot of it back on volume. (By essentially destroying the rest of the auto industry.)
There is no hope of that happening. You're never going
to convince people to remove safety features,
With that said, I don't think the savings from removing safety features would be big enough to have much impact on Google's finances. I'd have thought the real savings would be from avoiding the costs of being in accidents. Or capturing some of the value of people being productive when they would otherwise be driving, although that value might be hard to capture.
[1] http://www.zdnet.com/article/enterprise-rent-a-car-removed-a...
I agree autonomous driving changes some cost dynamics, but on the other hand people not only have higher expectations on rented vehicles as far as cleanliness and safety go (that "check engine" light is no longer optional, dirt from previous passenger's shoes needs to be vacuumed, random leftover trash and water bottles need to be taken out), but are also likely to abuse rented vehicles for random dirty jobs like hauling potted plants from the nursery, as well as plain old bar hopping while drunk with associated sanitary accidents.
There's Tesla, GM (with the Cruise acquisition)...heck even @geohot's startup comma.ai is also tackling the same challenges.
I highly doubt that will be enough to replace the market leader position they have with ads. And believe me, ads are going to die out quicker than a coked out wannabe actor in LA.
But when they're used, most of them are used at the same time - rush hour traffic. If everyone wants to go to work in a car at the same time, you'll still need about as many cars.
What's needed is a diversification of working times: if half of the workforce started work an hour later, it would have a huge impact on traffic density and would also make things like shared self-driving cars more realistic.
In terms of mobile apps, yes. There are rootless-firewalls that register themselves as an all-routes VPN and then blackhole 'unwanted' traffic.
Mobile browsers such as Firefox already have the same ad blockers plugins as desktop.
a) licensing technology to car manufacturers for self-driving cars
b) Manufacturing and selling hardware ( like Chromebooks, OnHub, Chromecasts etc )
c) Google Apps, GCE, Google Drive etc
d) Google checkout/wallet payment processing
e) Online publishing with Google Play, Music, Youtube etc.
If you look through Google's list of products[3], I am sure you will be able to find many more potential high profit products. But they are terrible at turning them into viable businesses.
[1] http://www.theregister.co.uk/2016/01/28/amazons_numbers_for_...
[2] http://www.wsj.com/articles/alphabet-reports-rising-profits-...
b) Low margins
c) Thin margins
d) Lots of competition
e) Maybe
Nothing beats the fat profits of auctioning off ad space to advertisers.
Although I use Google Search a lot less than I used to, I find myself a fairly happy customer of Play Music + TV + Movies, and I am using GCE as the platform for a new book I am writing on cognitive computing.
Google checkout may end up being huge. Google has sufficient funds to do more Google branded products. Their premium Chromebook is sort of too expensive to be a mainstream product, but I could see a Google branded cheaper Chromebook selling very well.
Google branded Chromebooks and Android phones bundled using their Fi wireless data services also seems like a good source of profit.
It wouldn't necessarily eat the entire car industry, but it's close.
That said, yes, they have to target problems that require a lot of capital, because, in practice, a company that will turn a profit no matter what you do is not one that is ever in a rush, or where hungry entrepreneurs go. They have to aim for niches where regular venture capital would never dare to go. This leads to lots of risky bets, looking for one that really moves the needle.
Remember Xerox PARC? That is what a monster like Alphabet ends up doing. It was not great for Xerox, but we all sure benefitted from their 'failures'
I think in these kinds of conversations we sometimes lose a little perspective.
So it seems to me that some of the smartest guys doing the coolest tech in the world is not sufficient to making money.
I'm sure they make money in other pursuits (I'm sure GCE is doing some, and I hear their government contracts are sizable) but $100m just to tick up the revenue decimal point...
One of the main issue i see here is pretty typical for Google in my view, ie. that Google isn't really trying to serve customers - i mean in search Google is monopolist and thus advertisers would pay attention to and follow every whim of Google. In cloud computing customers don't have to appreciate the honor of being a GCE customer, instead they can just go to AWS (where automated tools as well as real customer service are really geared for customer).
I've seen too many instances of pretty simple Google usability / feature bug reports closed as "will not fix / working as intended" to chalk it up to specific teams. "We built the Pontiac Aztek perfectly, and you should love us for it" type project design seems embedded in their DNA.
Short term thinking, that's the problem with the equities market.
What projects? The self driving car? The traditional car companies (that also work on that), Tesla, the Chinese, and even Apple who's verified to be working on such a project can possibly all kill them on that market.
What else of importance is there? Their AWS competitor?
Google Fiber. Note how profitable that is for Comcast as a monopoly. I'm confident Google can still reap double digit margins while keeping costs down for Google Fiber users through their knowledge of network management.
They're not so much struggling to make money, but struggling to make comparable money to one of the most phenomenally successful businesses ever seen.
It's like saying Apple TV is a hobby because it's only a billion dollar business.
Rounding errors at Google/Apple are greater than our wildest dreams.
Also, mobile chrome (increasingly dominant worldwide) doesn't, and won't, have adblocking.
Yes, I'm ignoring numerically insignificant installs like rooted hosts redirects, firefox mobile, opera, etc. Those aren't going to impact revenue.
I don't think ad blocking represents armageddon for Google.
Can anyone shed light on the relatively widespread adoption of ad blocking software in Poland and Greece? A cursory search doesn't indicate any particular bandwidth or cost constraints.
Unlike desktop, they control Android and its ecosystem. They just won't make it easy to block them.
- Disable ad blocking in Chrome
- Block browsers blocking ads from Google search
- Release tools for AdSense that block content when ad blockers are detected
The downside to this would be in the backlash that would follow, but they will resort to these measures if ever their business is truly threatened by ad blocking.
> Restructure as a Meta Company balkanizing google search to limit anti-trust lawsuits.
> Allow other sectors of the company to start using that data to create businesses.
> Invest heavily into infrastructure and try to promote google as the main infrastructure for developers to build on. Probably really engage the community by doing open source projects for data analysis & machine learning (their core competency) and provide tutorials, data hosting and google service integration so developers get into their ecosystem.
> continue investing in Android for the 1.3 Billion people using
> continue delivering chrome for the 40% internet users using it
> Consider monetizing the nearly 1 Billion active gmail users.
However, if they were really smart, they would release eyeglasses that cost 2-4000 dollars and have less computing power than a calculator. This will be a gamechanger.
And yet frequently the press glorifies Google's "innovation" and is bullish on Apple, that has like 4-5 different sources of income (the PCs, the phone, the tablet, the watch, the tv, the cloud services, the app store, the music store) -- with more than one of them earning more profits than the whole of Alphabet put together.
>with more than one of them earning more profits than the whole of Alphabet put together.
Which would those be with the exception of the phone? As for those other other revenue streams you mentioned - they're just a blip on the radar (tvOS and cloud - really?)
The App Store, while big in itself, is insignificant to Apple's revenue stream. Which makes me think you are not really familiar with how it breaks down.
Apple's revenue is ~230 billion. Alphabet is around ~80 billion.
iPhone revenues were 68 of that, the iPad is 9%+, the Mac another 9%, services is 8% and other products (Apple TV, Apple Watch) around 5%.
You could kill the iPhone today and still have a killer company the size of Alphabet.
As for the "blip of the radar" regarding the Apple cloud services: http://appleinsider.com/articles/16/04/20/as-a-standalone-co...
As of now:
Microsoft - down 5%. http://www.marketwatch.com/investing/stock/msft
Visa - down 4% http://www.marketwatch.com/investing/stock/v
Starbux - down 4% 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.
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.
The other option is to make your product hard to copy by network effects or data collection, but again, here it's natural for the cheapest guy to win.
And good products that didn't have ads like google reader get shutdown :/
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 :)
Gmail hasn't had nearly the stifling effect that one might assume!
Such as?
My morning routine involves marking at least ten emails as spam on my gmail account. They really aren't the be all and end all of spam blocking.
My non-gmail account (on an address that has been around for almost a decade before gmail existed) running a more modern anti spam solution, not nearly as bad.
Why can't they sell products and be
like an Apple, Oracle, Microsoft.
Aside from what Google's doing. You're assuming that the value someone personally derives from using something is the value other people derive from pushing it to them.
I.e. you have ads on Google, some of which cost >$10. To the companies paying for them that makes sense, because they might be selling a product that costs $500-1000, with say 10% conversion.
But a user is never going to be persuaded to pay >$10 simply to click a link.
So yes, there are some things Google does for free that they could be selling, but a) they may not be easy to sell directly b) even if people bought them it wouldn't make up the difference they make from ads, because the value isn't on the consumer side, it's on the advertiser's side.
Google could not just become a wildly profitable Apple-style "hardware first" company overnight (or, arguably, ever).
Conversely, we have all seen Apple struggling to deliver cloud services that are reliable and desirable (beyond their integration into Apple's ecosystem) since the days of iTools and MobileMe..
(for the people who don't want to eat them)
Expected value of a class-action asbestos lawsuit = Millions? 10s of millions?
For mesothelioma, an in-person referral from a doctor to an attorney is worth well over $10,000. Of course the doctor doesn't get paid until after the successful suit - but even discounting the time value of money, it's easy to see how advertising at $50/click could work out.
Do you feel like the NFL will be a better company once it rids itself of that pesky "football" dependence ?
Will McDonalds finally break free of the hamburger racket and flourish as a company ?
Google isn't some company that just happens to make a bunch of money from ads - they are an advertising company. Period. The end. Online ads stemming from search results is the thing they do.
It sure sounds neat to bootstrap a world-beating conglomerate and dominate all market spheres with your plexes full of big brains, but it's not going to happen.
It's not going to happen.
They will live and die with the search ads. They will not disrupt the car industry. They will not launch rockets to mars. They will not solve homelessness.
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.
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.
Ad clicks have been outpacing traffic for quite some time now. It wasn't always that way..it used to track the same.
At some point, there's no real estate left to push ads into, or you are as optimized as you can get.
Or, you play that game too far and consumers react in a different way (ad blockers, etc).
(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...
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.
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!
If technology people start to prefer DuckDuckGo things may shift quickly.
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.
Fire everyone.
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!
Both Microsoft and Intel very successfully diversified their businesses at various times. I'm not sure you could have named two other tech giants that did a better job of diversifying away from their original product lines (which was not Windows for Microsoft, and was not microprocessors for Intel).
Microsoft didn't start out as an operating system company, they diversified into that business. Then they successfully diversified all over again. Windows dominated Microsoft's business for about 15-18 years. That's no longer the case. All profit from Windows could go away tomorrow and they would still be earning around $15 billion per year in net income. They're now a heavily diversified technology conglomerate.
Intel was a business initially built on memory chips, which were their first products. They did an extremely good job of diversifying; had they not they would have disappeared with the memory business.
"While Intel created the first commercially available microprocessor (Intel 4004) in 1971 and one of the first microcomputers in 1972, by the early 1980s its business was dominated by dynamic random-access memory chips."