Google drops Exchange after the financial results worse than expected

Under pressure in Europe and in the field of online advertising, the heart of its economic model, Alphabet, the parent company of Google, has presented financia

Google drops Exchange after the financial results worse than expected

Under pressure in Europe and in the field of online advertising, the heart of its economic model, Alphabet, the parent company of Google, has presented financial results for the first quarter of 2019 less good than expected. At $ 36.3 billion (approximately 32,45 billion euros, an increase of 17% compared to the same period last year), its revenues are lower than expected averages of analysts, who had forecast a billion more. This development also marks a slowdown in growth: by 2018, the turnover of the Alphabet had increased by 26% year on year. Investors immediately punished this performance. The title of Alphabet lost 7% in trading after the close of the New York stock Exchange.

This slowdown in the growth of Google, which accounts for the overwhelming majority of the revenue of the Alphabet, is due mainly to the fact that the smartphones are capturing more and more consumer activity. However, the internet platforms charge less to advertisers to advertise on mobile than on computer. As consumers use more of their smartphone, this source of revenue is therefore under pressure. An especially strong during the quarter as the growth of traffic itself (number of clicks on ads) has also slowed, including on YouTube, " said chief financial officer Ruth Porat, during a conference call with analysts. Advertising today accounts for 85% of the turnover of Google. It must face the fierce competition from other giants of the Web on the sector, including the social network Facebook.

Increase in spending

Another element that is very observed by the markets, the costs of acquiring revenue ("Traffic Acquisition costs" or TAC) increased to 6.86 billion dollars (about 6,13 billion euros). These TACS are the sums paid to third parties by Google to ensure that it is the default search engine devices or operating systems, or that its various applications are pre-installed in smartphones. In march, the european Commission has imposed a new fine of € 1.49 billion to Google for anti-competitive practices. It is the third penalty of its kind in less than two years. This time, Europe has just reproached the us giant for its business practices related to Android, its mobile operating system. Because of this new fine european, the quarterly net profit of Alphabet fell by 29% in a year, to 6.7 billion dollars (about 6 billion euros)

Alphabet, which also manufactures devices like smartphones or speakers connected, also noted that "pressures on the market of high-end smartphone", implying that sales of its Pixel, the latest models have recently been put on sale, had to be disappointing. But "the momentum continues" in relation to the connected speaker with voice command, has assured Ms. Porat. In addition, it has promised an "announcement" listed devices at the annual conference of developers Google in may.

Finally, Alphabet has seen for several quarters a significant increase in its expenses (recruitments and technologies, in particular) and has once again warned Monday that its expenses would increase."Our priority has always been to invest in the long term", explained Sundar Pichai, Google's CEO. Alphabet also invests a lot in the purchase of premises that: it announced in 2018 several real estate purchases are important to New York.In February, Google announced that it would invest $ 13 billion in offices and "data centers" in the United States in 2019.

(with AFP)

SEE ALSO: Google threatened with record fine of 13 billion dollars in Europe

Google threatened with record fine of 13 billion dollars in Europe - Watch on Figaro Live

Updated Date: 03 May 2019, 00:00

Kathleen Lees

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