Alphabet Earnings: Google Cost Per Click Declined 29% 02/05/2019

The Google name is displayed outside the company's office in London Britain. Toby Melville Reuters  File

The Google name is displayed outside the company's office in London Britain. Toby Melville Reuters File

Alphabet Inc's fourth-quarter revenue and profit beat Wall Street's expectations on Monday but sharply higher spending, as it added data centres, cloud engineers and marketed its services heavily during the holidays, anxious investors.

Facebook Inc. showed that last week by reporting a 30 percent jump in fourth-quarter revenue from a year earlier.

The fees that Alphabet pays to companies like Apple for Google to be their default search engine rose to $7.4bn up from $6.6bn for the same period previous year. "With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers, and partners around the globe".

While Alphabet has invested aggressively in new businesses such as cloud services and autonomous vehicles, advertising still generates most of its revenue.

Alphabet and Google, in particular, had a rollercoaster year in 2018 in terms of publicity.

The revenue mainly comes from Google Fiber, a high-speed internet service, and Verily, a life sciences division, Porat said on the call. Figures for the company year-over-year are up nearly across the board, with the notable exception of Google's traffic acquisition costs (TAC) and operating losses for Google's "Other bets" category. He declined to name a specific number, but noted that Google's cloud business became a "multibillion dollar business" under Greene's leadership; "that was not the case five years ago", he said. The costs of its most ambitious projects also rose sharply.

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But the latest set of tech results have cheered investors.

In the final three months of 2018, Google's CEO was grilled by Congress about data privacy, its employees around the world walked out over sexual harassment scandals, and it disclosed a security bug impacting its largely forgotten social network, Google Plus. Facebook results beat Wall Street estimates last week.

"The company's highest-growth areas (mobile search, programmatic, YouTube, hardware, and cloud) have lower margin profiles than the traditional desktop search business, so we see continued margin degradation for the company as a whole", wrote BMO Capital Markets analyst Daniel Salmon in a recent note.

'Acquisitions are an attractive complement to what we do to drive organic growth. The three largest advertisers, according to Ad Exchanger, were Geico, Samsung and Disney, which together accounted for 15% of all advertising past year.

"I think Microsoft and Amazon need to keep one eye open with Google", he said.

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