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Alphabet’s Double-Edged Sword

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Google's parent company reported fourth-quarter earnings yesterday that topped expectations across the board. But the dual threats of rising costs and growing competition were enough to sink shares about 3% after hours.

Revenue surged about 21% annually to $39.3 billion—and given that it represents such a giant portion of sales, we're not surprised that advertising revenue also grew 20% to $32.6 billion.

But it didn't come cheap.

  • Traffic acquisition costs (aka the fees Alphabet pays to other companies to be their default search engine) totaled $7.44 billion, up 15%.
  • And capital expenditures came in around $7 billion for Q4, up 80%.

Plus, cost per click on Alphabet properties (or what the company charges advertisers) fell 29%. Remember, Alphabet's been navigating an increasingly competitive digital ad landscape. Does anyone know who invited Bezos?

Bottom line: That drop in advertising costs could spook investors worried Alphabet's losing its pricing power gusto. Still, it was a (mostly) satisfying ending to a string of (mostly) impressive Big Tech earnings.

via Morning Brew

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This will eventually get to the point that only the largest sites will be able to survive. 

Online newspapers will die out.....

only niche sites will survive well as children that are completely dependent on Google and will only work within the budget that Google drops down to them.

I suspect someone at Google will wake up when content creators start disappearing online.

Maybe they'll turn to ranking Adsense pages above Facebook and other sites so as to protect their own sphere of influence?

I wonder which year this will all start to happen?

Currently we just see ad rates plummeting and traffic diverted to the biggest players

When will there be only the top 5? Will Google be happy with just 5 top players that use them?  (Analogy of course)

Amazon is also eyeing sites like mine..... wondering what if they could replace all the Google ads with their own?

Probably is.... they don't pay per click and they don't have responsive ad formats.

I think the Government allowed too much consolidation in the advertising business creating a huge duopoly.

Doubleclick should never have been allowed to merge with Google.

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