Google profits plummet 27 percent in Q3 2022 earnings report
arstechnica.com
arstechnica.com
Given that Google dominates email, search, browsers, phones, creator video, and a laundry list more things... it's definitely indicative of a story.
Sure this isn't the end of the world but clearly the market doesn't believe this is a "non-deal".
We're also absolutely seeing a broader shift in the tech space, and traditionally companies like Google have been more immune to market changes than others.
But of course the current mantra of HN is "this is fine", it's part of a broader trend of denialism in the community that major shifts, towards things being worse, in many parts of our lives are happening.
IE, why is this story on the front page of HN and why is it important? What is the narrative you get from this?
9.63% actually
> that is no big deal in the grand scheme of things
I'm not sure how you are making this claim. Today is the 2nd largest single daily drop in GOOG in the last 10 years the company (as a precent).
The 1st largest drop was on 3/16/2020 The 3rd was on 3/12/2020
That means we are seeing early pandemic level drops in a price over an earnings call.
Both of those other drops where due to systemic shocks to the market, this drop reflects just GOOG.
So this is arguably the largest single day decline in the share price of GOOG due solely to their own performance, not do to macro trends.
> why is this story on the front page of HN and why is it important?
As already answered this is a historic decline in the price of GOOG.
> What is the narrative you get from this?
The larger story is that we're seeing a down turns in all the companies that where the hallmark of the current tech boom. The term FAANG originated because those stock were seen as incredibly strong, high growth stocks.
The big part of this story is, as I have mentioned, these companies aren't losing value because of an industry trend that is equally effecting all stocks (that's happening as well) but because of their own individual performance.
Look everyone: economies are cyclic. We had a boom. Now we're in a downturn. It's happened before, many times. It will happen again. Nothing happening today is remotely as scary as what we saw in 2008, frankly isn't nearly as disruptive as the 2001 crash.
Google will be fine. The tech industry will be fine. Buy the dip, if you're into that sort of thing.
As what's happening "today" is basically a postponed and amplified version of what should have happened in 2008, I have to disagree.
I don't think today's economy is anything like the frothy housing bubble was in 2007/2008 timeframe.
I think there's a possibility of a tech bubble akin to 2001, but that actually wasn't very disruptive for our economy. I see today more similar to 2001, aside from the weird supply chain issues due to a greatly diminished workforce (the Baby Boomer's retirement is the biggest challenge for this year IMO). (Of course, people have been calling a bubble in tech for decades now, but _eventually_ that damn tech bubble will pop again, lol)
edit to add: we already see a drying up of ad spends. What happens in an economy built on selling ads, or selling services to people who sell ads when ads sales fail to meet expectations for too long? Everyone forgets data-driven advertising is what saved tech after the crash. Public opinion is rapidly turning against that savior.
Brands will keep spending to keep their customers, and cheaper alternatives will keep spending on ads to promote their sales.
In competitive market and free economy ads are a fundamental engine that will keep economy running. Ads is sort of toll booth that takes their cut no matter what
They failed to achieve their own predictions on both EPS and revenue, by quite a bit on EPS, and that is indeed a story.
Why would I stay with Google if my loyalty counts for nothing?
Same goes for Netflix, if you aren't going to reward me being with you from day 1 why should I show you any loyalty?
I will take full advantage of any free trials and cancled at the end switching from one to the other.
Sure, I'll go get my ad-free YouTube from the competition
that leaves crappy settop boxes
yes
> What if I want to AirPlay? What about Chromecast?
"that leaves crappy settop boxes"
Pardon some humor: I laugh when non-tech friends don’t want to pay for ad-free YouTube but they will spend a ton of money every month at Starbucks.
Between lots of quality material on philosophy, beautiful background nature videos, Lex Firdman interviews, online class materials, Dust sci-fi short films, etc., etc. YouTube is probably the best value of anything I spend money for.
Have you looked the change in your grocery bills in that time? Prices are going up everywhere.
It is true that “internal ads” that people place inside of their content seem to be more prevalent. I don’t see other ads on YouTube.
Are you saying Netflix shouldn't raise your rate because you subscribed from day 1?
I don't like cost increases either, but this seems like a weird thing to demand.
I think consumers have just come to expect investors to subsidize forever. It’s had a market distorting effect for too long
Edit: I was downvoted, but I stand by what I wrote. Google has Android and (for now) superior search results. Netflix has content (including their own, not just other people's). Apple has their devices, which are killing it right now. These companies will be okay. It is Facebook that might not exist in 5 years. What do they actually have other than fickle network effects that can be here today and gone tomorrow? VR? That won't save them.
There definitely are a lot of people that interact with Facebook less, which is obviously huge. I'm not sure these other social media sites will eat up Facebooks core business.
It seems like Facebook could continue to struggle to grow, but these sites seem to fill different roles. I could definitely see Facebook becoming little more than a calendar/messaging system.
Maybe it will collapse eventually, but what we saw with MySpace was pretty extreme, total, and sudden. It happened to Digg too, but wasn't this around the same time as the MySpace stuff was happening? I don't see much reason to think Reddit is going anywhere, either.
We'll see, I wouldn't be shocked either way.
Also, as a side note was getting sick of all the health and fitness cults. I got fed up getting banned for arguments with someone insulting me because I suggested that consuming massive amounts of fat might have negative health consequences, or that deadlifts are a frequent source of injury, both severe and chronic, or that peanut butter is actually one of the purest foods you can buy (seriously, read the label, it's almost entirely peanuts and salt)...
It got so frustrating. I understand that there's counter arguments to this stuff, but these are very mainstream and rational beliefs, including with people that know what they're talking about. It seemed like the safer advise was being shouted down.
I actually thought it filled a niche that is slightly different from what I find on twitch, youtube, facebook, ect.
I found a lot of videos of random people just doing random things. I do happen to think the community may have lost it's way... OTH the era that some people see as the golden age of reddit included stuff like the fappening.
They can acquire other companies, basically thats how they have survived for a longtime.
This is, at least, where the valuable consumers (20-35 women are by far the most valuable from an advertising perspective) are spending the most time, even if they still have FB accounts.
The problems isn't that the cool kids went somewhere else. The problem is that the cool kids never really meant anything. People's attention shifted to different "cool kids" then the old "cool kids" adapted.
Stock market is gambling and wishful thinking, but with worse outcomes.
1) American population ~60M -> 330M since 1900.
2) Only country w/out capital destruction from WWI and WWII.
3) International money flight (Vietnam, ex. Soviet states) into U.S.
4) Saudi oil $ recycled into US markets (& others due to reserve currency status)
5) Rise of index funds and transferring "hidden" liabilities (pensions) into explicit liabilities (retirement funds, 401ks). Turning the market into a retirement scheme (look at solvency of social security; if people actually withdraw money to retire, normal market will have same issues)
Basically, the market is driven by liquidity and it has become a lot easier to get money into the market over the last ~50 years.
If you use Google specific functionality, then yes,you have reasons to worry. If you are host agnostic and use Google cloud just as a deployment target, then you shouldn't worry.
Sunsetting GCP will immensely damage their reputation.
However, they will absolutely shutdown some of the other value-add services like AI-as-a-service and some of these others that are probably not being heavily used.
They need to be competitive, and to do so, they must be at least feature pairing with AWS/Azure. I can't think of a single service they can simply shutdown. Actually they need to build more.
I am an AWS long time user. I have toyed around with GCP, and I found it a very disconnected platform. They don't seem to have a unified story around it.
AWS is not perfect, but it is just waaaay ahead. You can tell, they are a heavy customer centric company.
While I'm usually nervous about Google discontinuing things, they'd be idiots to cancel something with $6B in revenue growing that fast.
If Apple begins blocking their trackers (see Google's recent worldwide Chrome ad campaigns - a campaign that likely sees the writing on the wall), they lose all Apple revenue.
If 10B market cap companies begin to campaign for antitrust, and Microsoft negotiates for Bing on Apple, Samsung, and Firefox, Google will lose everywhere else.
I honestly don't even see why Microsoft couldn't play equally dirty and revert Chrome's default search engine on Windows to Bing. It's an equally dirty move to the stuff Google has done.
Google could have a strong cloud product, but they're in distant third and aren't investing enough to take away AWS/Azure market share. Their culture of launching products for promo, launching competing products (eg messengers), and then killing them has severely damaged their reputation.
Also, Google has Android ie. largest OS in terms of user-base.
I think bing is better, but google still actually dominates search with a great product, compared to their competitors.
Building their own platforms was a brilliant idea that made Google resilient against competition owning their Ad delivery platforms.
This has nothing to so with the side hobby that's Play Store.
What platform did they build though?
Android was bought from a third party. YouTube was bought. Chromium was forked from Webkit. Every of Google's in-house projects besides search engine and ad network was a failure.
Intellectual laziness of your "takedown" reminds me of that dude that pronounced Dropbox pointless because rsync is enough.
They've been shoveling their ad revenues desperately into a furnace of "everything but ads", throwing ideas against numerous walls to see what sticks, and copying other company's product roadmaps. Almost none of it has worked out. They're still dependent on that ad revenue firehose for 90-ish percent of their profits.
When that firehose slows, the only way to maintain things will be to cut costs. So in a way I'm glad I got out of working there before that era began. "Fun" times there have been slowing for years, but it's going to get serious, I think.
Not as bad as Facebook, though.
Google seems both fragile and sloppy. How they managed to get a bigger/faster slap on the wrist for antitrust in the EU than Apple is a demonstration of this.
Now, it sits at around ~$95, still ~50% gain since pre-covid ...
I think the 2020 was a bubble and as such was not sustainable. Things are simply normalizing.
And don't get me started on stocks like TWLO, ZM, etc ...
Better proxy to look at top line if you want a really rough picture of overall health.
Otherwise, you need to make meticulous adjustments to bottom line, justify those adjustments, and only then do you do a bit better than top line.
Many tech companies living in fantasy land, having gotten used to free money and strong organic growth essentially guaranteed from secular tailwinds. At a certain scale, and level of competition (more and more social/advertising platforms becoming popular), these companies become more cyclical rather than guaranteed growth bets.
Google is a great company that will surely be worth more down the line, but the whole hire as fast as possible and pay increasingly high comp is going to have to come in line with the new reality.
You can't expand headcount and employment costs faster than your revenue/profit growth and expect it to end well
But their employment expense and headcount growth is far, far ahead of their revenue growth. A recession next year is pretty much inevitable at this point due to inflation dynamics and Fed policy.
Having their stock get hammered even worse as revenues contract and margin compression eats into earnings is going to lead to many more problems for them in the future than if they just slow the pace of hiring now.
They may even be doing layoffs this time next year, which is much easier to avoid if you don’t overhire leading into a recession
$14B is not that significant for a trillion dollar company. It's all relative.
Google may be fair value or may not, but ignoring proper approaches to valuation is a good way to lose your money... as many younger investors are starting to learn.
What’s your point?
"We are creating value" is code word for "we're increasing the price of the service, and showing you a bunch of stuff you don't use".
Guess the ad-sense money button broke and now they have to try and milk other services.