On Thursday, Google parent Alphabet Inc. posted fourth-quarter profit below analysts' estimates. It was hurt by a higher tax rate, but the analysts cheered the company's progress in expanding its business beyond on advertising.
Google Alphabet Shares Tumble As Earnings Miss Estimates
Google parent Alphabet reported on Thursday their quarterly earnings that missed analysts' estimates, as it earned fewer per click on its properties. The company's costs also tapped higher as it was invested in talent and the core business, according to CNBC. The revenue topped expectations that were led by YouTube and other mobile searches, chief financial officer Ruth Porat claimed in a statement.
On the other hand, a Google representative said that YouTube has been the one to have slowest to pick up the slack from Google's other advertising properties. The company posted the fourth-quarter earnings per share of $9.36, adjusted and excluding items, on revenues of $26.06 billion.
While the advertising still accounts for the lion's share of Google's revenue, from the rising 17.4 percent to $22.4 billion in the quarter, Chief Financial Officer Ruth Porat underscored that Alphabet is broadening its business -- pointing to growth in fields such as hardware, app sales, and the cloud business.
Alphabet's other revenue, which captures such businesses, climbed 62 percent to the total of $3.4 billion. "We see tremendous potential ahead for these businesses, as well as in the continued development of non-advertising revenue streams for YouTube," Porat said on a call with investors.
The decisions were met with a mixed reaction from Wall Street, which sent shares 2.2 percent down to $838 in extended trade following the closing at $856.98 on Nasdaq. However, Google faced a higher tax rate of 22 percent, compared to the 19 percent for the year overall, contributing to the impression in profitability.
Other products from Google such as the Google Home, a smart speaker as well as the variants of the Google Pixel smartphone also showed promises and gained adhesion especially over the holidays last year, Google Chief Executive Sundar Pichai said. "We’re committed to this for the long term as a great way to bring a beautiful, seamless Google experience to people," he explained.
Clicks On Google Ads Dropped
According to Mashable, both web and mobile ads are dropping in value. Google’s cost-per-click dropped 15 percent in the fourth quarter as reported from the same period the year prior. Paid clicks are those ads on which an advertiser pays only if a user clicks on them.
Pichai said in an interview that the company is prioritizing YouTube and integrating more machine learning to improve content and advertising. Facebook, Snapchat and other over-the-top platforms and services are biting into that as they all look to pull from TV budgets.
Since the clicks on Google Ads dropped, Google has been making big moves in hardware instead. If you remember, the company released its new line of smartphones called the Pixel and Pixel XL in October, which is competing with Apple's iPhone. Google didn't break out exactly how much money is coming from the new smartphones but analysts predictions are all over the place, some pegging it at just over 500,000 and others at 1 million.
After that success, Google released Google Home, its answer to Amazon Echo, a home speaker powered by a digital assistant. "We are committed to this to the long term as a great way to bring a seamless Google experience," Pichai said. "You can expect to see us expand our offerings thoughtfully."
