Google Parent Alphabet's Ad Sales Hit Record, but Costs Pile Up--2nd Update
29 October 2019 - 9:10AM
Dow Jones News
By Rob Copeland
Google showed the complications of operating an internet empire,
as steady growth for online advertising sales in the third quarter
was outweighed by rising costs and poor results for some long-held
company investments.
The search-engine giant's parent, Alphabet Inc., reported
revenue of $40.5 billion, a rise of 20% over the same period last
year. While that would be enviable growth for many other companies,
the clip is modestly below Google's long-term track record.
Alphabet's profit for the third quarter -- $7.1 billion -- was
lower than Wall Street's expectations and down 23% from a year
earlier, when it was boosted by changes to the U.S. tax code. The
company's margin was also crimped as costs rose, a long-term
concern for investors.
However, strong results could create a tricky situation for the
company as it faces regulatory scrutiny. Even as ad revenue rose
17% to $33.9 billion, analysts and investors are encouraging the
company to move forward on new advertising opportunities in units
like video platform YouTube and the ubiquitous Google Maps app.
Yet such efforts to create new profits across the conglomerate
are likely to further fuel regulators' concerns about
competition.
The Trump administration and 50 attorneys general have opened
wide-ranging probes into Google, including whether it has an unfair
advantage over smaller advertising rivals.
The Justice Department's antitrust chief, Makam Delrahim, said
last week that a breakup of Silicon Valley's tech giants is
"perfectly on the table" as part of evaluations of whether such
firms abuse their market power.
Alphabet's stock fell 1% after hours. Shares have gained roughly
25% this year, in line with the broader technology market.
Advertising is central to the Google narrative, constituting the
majority of the company's revenue -- and because the company is
scant with disclosures on other areas of its business. Alphabet has
resisted requests from analysts to detail the performance of
YouTube, for instance, and combines results from units like the
Waymo self-driving car division, hardware and cloud computing in a
line item that Google simply calls "Other Bets."
Write to Rob Copeland at rob.copeland@wsj.com
(END) Dow Jones Newswires
October 28, 2019 17:55 ET (21:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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