Google’s parent Alphabet results hit by rising traffic costs, strong dollar | Reuters
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Google’s parent Alphabet Inc (GOOGL.O) missed Wall Street targets for first-quarter profit and revenue on Thursday as it spent more money to build traffic for its mobile advertising services.
The results, which were also hit by the strong dollar, drove shares of the Web search company down 6 percent in late trading Thursday.
Alphabet’s consolidated revenue rose to $20.26 billion from $17.26 billion, slightly below the $20.37 billion analyst consensus, according to Thomson Reuters I/B/E/S. Non-GAAP earnings per share of $7.50, excluding one-time items, missed analysts’ expectations of $7.97.
Chief Financial Officer Ruth Porat said on a conference call with investors that payments to other web sites, known as #traffic_acquisition_costs (#TAC), totaled $3.8 billion and accounted for 21 percent of advertising revenues. The percentage of ad revenues spent on TAC grew 13 percent year-over-year.
That reflects the ongoing shift to mobile advertising and the growing importance of programmatic advertising, in which ads are bought, sold and displayed by automated systems.
Investors should get used to seeing increased TAC as “the cost of doing business,” said Sameet Sinha, B. Riley & Co. analyst.