Google's money churning ad engine sputters in rough economy

SAN FRANCISCO, United States - Google parent Alphabet reported quarterly earnings that fell short of market expectations as belts tightened in the digital ad market that drives its revenue.

Alphabet said it made a profit of $14 billion in the third quarter on ad revenue that grew just 6 percent to $69 billion when compared with the same period of last year.

Aside from one period at the start of the Covid pandemic, that would mark the weakest revenue growth at Alphabet for any quarter since 2014.

"When Google stumbles, it's a bad omen for digital advertising at large," said Insider Intelligence analyst Evelyn Mitchell.

"This disappointing quarter for Google signifies hard times ahead if market conditions continue to deteriorate."

Alphabet shares slipped 6.8 percent to $97.35 in after-market trades that followed the release of the earnings report.

Google's foundation in advertising on its heavily used search engine does give it an advantage, however, over other ad-reliant tech firms such as Meta, Snap and Twitter, the analyst added.

"Over time, we've had periods of extraordinary growth and then there are periods I viewed as a moment where you take the time to optimize the company to make sure we are set up for the next decade of growth ahead," Alphabet and Google chief Sundar Pichai said on an earnings call.

"I view this as one of those moments."

Alphabet chief financial officer Ruth Porat said the financial results in the quarter showed "healthy fundamental growth in Search and momentum in Cloud" computing revenue, but suffered from foreign exchange rates given the strong US dollar.

"We're working to realign resources to fuel our highest growth priorities," Porat said.

Big tech firms are grappling with multiple challenges, from inflation to the war in Ukraine, putting pressure on earnings.

Alphabet recruited throughout the pandemic, but announced a slowdown in hiring as ad revenue growth cooled this year.

"Within this slower headcount growth next year we will continue hiring for critical roles, particularly focused on top engineering and technical talent," Porat said.

Many other tech companies have decided to lay off staff, including Netflix and Twitter, or slow the pace of hiring, such as Microsoft and Snap. 

YouTube squeeze? 

Worsening the financial situation for Alphabet is the fact that Google tends not to aggressively promote advertising on its platform with tactics such as trying to convince businesses that online marketing is a smart move during tough economic times, said independent tech analyst Rob Enderle of Enderle Group.

"They don't like the idea of making their money off advertising, so they don't treat the market very well," Enderle contended.

"Now, you are seeing the adverse impact of not taking your revenue source seriously."

The earnings report also showed that ad revenue at YouTube was slightly lower than it was in the same quarter a year earlier, despite a hot trend of people watching video on-demand on the internet.

"Overall, I feel YouTube remains in a really good position to continue to benefit from the streaming boom," chief business officer Philipp Schindler said during an earnings call.

However, Alphabet noticed a "pullback in spending" by advertisers at YouTube in the quarter, Schindler told analysts.

"They have a ton of competition in video, and TikTok is probably hitting YouTube pretty hard," Enderle said.

Netflix last week reported that it gained subscribers in the recent quarter, calming investor fears that the streaming giant was losing paying customers.

The company said it ended the third quarter with slightly more than 223 million subscribers worldwide, up some 2.4 million, after seeing subscriber ranks ebb during the first half of the year.

The turn-around in subscriber growth comes as Netflix is poised to debut a subscription option subsidized by ads in November across a dozen countries.

Rival streaming platform Disney+ is to launch ad-subsidized subscriptions in December.

Agence France-Presse

Big Tech rolls on as investors shrug off regulatory pressure

WASHINGTON - Pressure is rising on Big Tech firms, signaling tougher regulation in Washington and elsewhere that could lead to the breakup of the largest platforms. But you'd hardly know by looking at their share prices.

Shares in Apple, Facebook, Amazon and Google parent Alphabet have hovered near record highs in recent weeks, lifted by pandemic-fueled surges in sales and profits that have helped the big firms extend their dominance of key economic sectors.

The Biden administration has given signs of more aggressive regulation with appointments of Big Tech critics at the Federal Trade Commission. 

But that has failed to dent the momentum of the largest tech firms, despite tough talk and antitrust litigation in the United States and Europe, with US lawmakers eyeing moves to make antitrust enforcement easier.

Big Tech critics in the United States and the EU want Apple and Google to loosen the grip of their online app marketplaces; more competition in a digital advertising market dominated by Google and Facebook; and better access to Amazon's e-commerce platform by third-party sellers.

One lawsuit tossed out by a judge but in the process of being refiled could force Facebook to spin off its Instagram and WhatsApp platforms, and some activists and lawmakers are pressing for breakups of the four tech giants.

All four have hit market valuations above $1 trillion, with Apple over $2 trillion. Alphabet shares are up some 80 percent from a year ago, with Facebook up nearly 40 percent and Apple almost 30 percent. Amazon shares are roughly on par with last year's level after breaking records in July.

Microsoft, with a $2 trillion valuation, has largely escaped antitrust scrutiny, even as it has benefitted from the cloud computing trend.

The surging growth has stoked complaints that the strongest firms are extending their dominance and squeezing out rivals. 

Yet analysts say any aggressive actions, in the legal or legislative arena, could take years to play out and face challenges. 

Fast-moving environment 

"Breakup is going to be nearly impossible," said analyst Daniel Newman at Futurum Research, citing the need for controversial legislative changes to antitrust laws.

Newman said a more likely outcome would be multibillion-dollar fines that the companies could easily absorb as they adjust their business models to adapt to problematic issues in a fast-moving environment.

"These companies have more resources and know-how than the regulators," he said.

Dan Ives at Wedbush Securities said any antitrust action would likely require legislative change -- unlikely with a divided Congress.

"Until investors start to see some consensus on where the regulatory and law changes go from an antitrust perspective, it's a contained risk, and they see a green light to buy tech," he said.

Other factors supporting Big Tech include a massive shift to cloud computing and online activities that allow the strongest players to benefit, and a crackdown in China on its large technology firms.

"The China regulatory crackdown has been so massive in scale and scope, it has driven investors from Chinese tech to US tech," Ives said. 

"Even though there is regulatory risk in the US, it pales in comparison to the crackdown we're seeing from Beijing."

Analysts say the big tech firms are also well-positioned to deal with tougher regulations.

Tracy Li of the investment firm Capital Group, in a recent blog post that the tech giants face major risks in regulation around privacy, content moderation and antitrust.

"Concerns related to privacy or content may actually strengthen, rather than weaken, the moats of the largest platforms," Li said. 

"These companies often boast well-established protocols and have more resources to tackle privacy and legal matters."

Facebook 'gold mine' 

Other analysts point to the swift movement by tech firms to adapt their business models in contrast to the slow efforts to regulate. 

Facebook, for example, is adapting to changing conditions by moving into the "Metaverse" of virtual and augmented reality experiences, noted Ali Mogharabi at Morningstar.

Mogharabi said Facebook's vast data collected from its 2.5 billion users gives it the ability to withstand a regulatory onslaught.

"Antitrust enforcement and further regulations pose a threat to Facebook's intangible assets, data," the analyst said in a July 29 note.

"However, increased restrictions on data access and usage would apply to all firms, not just Facebook."

Independent analyst Eric Seufert said in a tweet that "regulatory changes will have a significant impact on Facebook's business, but the sheer scale of Facebook and the growth trajectory of digital advertising ameliorate that. Facebook's gold mine is far from depleted."

Newman said the large tech firms have expanded during the pandemic by delivering innovative services, extending a trend that has seen the strong get stronger.

"These platforms have created better experiences for consumers, but it is extremely difficult for new entrants," he said.

For investors, Newman added, "that means no one is creating revenue and profit growth faster." 

Agence France-Presse

  

Google 'task force' fights bad COVID-19 ads

SAN FRANCISCO -- Google said Thursday its task force devoted to fighting "bad" ads hawking bogus coronavirus cures, illegitimate unemployment benefits and overpriced medical supplies had blocked tens of millions of messages.

Google has blocked and removed coronavirus-related marketing pitches in recent months for policy violations including price-gouging and misleading claims, according to ads privacy and safety vice president Scott Spencer.A

"We have a dedicated COVID-19 task force working around the clock building new detection technology and improving our existing enforcement systems to stop bad actors," Spencer said in a blog post.

"These concerted efforts are working."


With health worries pervasive around the world, guarding against efforts to take advantage of people through pandemic-themed online ads is a priority, according to Spencer.

Google said it has been watching closely for advertising abuses taking advantage of the crisis since the COVID-19 outbreak started.

Deceptive ads have often been the work of "sophisticated actors attempting to evade our enforcement systems with advanced tactics," Spencer said.

He gave the example of a sharp spike in ads offering coveted supplies such as face masks at inflated prices designed to entice online orders that are never filled.

Alphabet-owned Google has a clear interest in protecting the integrity of the online advertising platform that is its money-making engine.

Google last year blocked and removed 2.7 billion "bad ads" and suspended nearly a million advertising accounts for policy violations, according to Spencer.

The California-based internet firm assembled a team last year to track signs of phishing or trickery regarding clicking on links, cutting the numbers of such "bad ads" by 50 percent as a result, Spencer said.

Google blocked more than 35 million phishing ads and 19 million "trick-to-click" ads last year, according to the company.

gc/rl

Agence France-Presse

Anger at Singapore ads offering Indonesian maids for sale

SINGAPORE -- Online ads in Singapore offering Indonesian maids for sale were Wednesday condemned as "unjust and demeaning," in a rare flare-up of tensions between the neighbors over domestic helpers. 

Singapore is home to almost 250,000 maids, mostly from poor parts of Indonesia or the Philippines, who head to the wealthy city-state to earn higher salaries than they can back home.

While Indonesia regularly protests about abuse and exploitation of helpers in Malaysia and parts of the Middle East, complaints about treatment of maids in tightly-regulated Singapore are less common.

However reports that Indonesian helpers were being offered for sale in the city-state on online marketplace Carousell quickly drew condemnation from rights groups. 

The adverts under the user name "maid.recruitment" reportedly offered the services of several helpers from Indonesia, while some ads indicated maids had been "sold." 

The posts on the e-commerce site, which operates in several Asian countries and describes itself as "a simple way to sell the clutter in your life," have now been removed.

Wahyu Susilo, executive director of Indonesian NGO Migrant Care, said the group "strongly condemned" the adverts and called for those behind them to be brought to justice.

"This is very unjust and demeaning to the migrant workers' dignity," he told AFP.

Singapore's labor ministry said it was aware of cases where maids were being "marketed inappropriately" on Singapore-headquartered Carousell, and had got the adverts taken down and launched an investigation.

"Advertising (foreign domestic workers) like commodities is unacceptable and an offence" under local laws, a statement from the ministry said. Employment agencies found guilty of such practices will have their licences revoked or suspended, it said. 

source: news.abs-cbn.com