Google Continues Slump After Ad Revenue Growth Slows

https://www.bloomberg.com/news/articles/2019-04-29/alphabet-revenue-misses-analysts-estimates-shares-fall

by dredmorbius • 7 years ago

199 126 7 years ago

bloomberg.com

asdfasgasdgasdg• 7 years ago

The shares "slumped" to the price from early March. Still up 15% this year.

sjf• 7 years ago

That's not difficult considering what happened in December.

product506• 7 years ago

YOu should look at how relatively google is doing vs. other tech companies or S&P vs. individually

deathanatos• 7 years ago

I'm not sure where the parent is getting 15%; Google seems to be up ~23% YTD. Today's close was an all-time high, though that might get somewhat undone in the morning.

To your point, that seems to be a bit worse than tech (~26% YTD) but better than the S&P (17% YTD).

duality2• 7 years ago

I wonder if Bloomberg, which also sells ad spots, is an unbiased source of information here.

neya2• 7 years ago

It's because Bloomberg News pays reporters more if their stories move markets [0]

[0] https://www.businessinsider.in/Bloomberg-News-Pays-Reporters...

duality2• 7 years ago

Interesting. So they're reporting on a competitor and are known to try to move markets with their stories. Is there oversight? Since I have no legal training I ask naively, do protections for journalism cover a situation where reporters aim to influence and persuade (like editorials) rather than provide "just the facts?"

crazygringo2• 7 years ago

People keep repeating that here on HN as if it's a bad thing.

New information moves markets, and the larger impact it has, the more it will move markets, because markets are built on information. And obviously the function of the free press is to uncover and disseminate new information, the more meaningful the better. So it's not underhanded -- it's noble and completely aligned with good.

(Of course if reporters make up information or lie it's bad, but that's a separate issue, for which lazy or unethical reporters are generally fired.)

dredmorbius6• 7 years ago

Bloomberg are not the sole source here:

"Google owner Alphabet misses forecasts: Google's parent company, Alphabet, saw its shares drop in after-hours trading after the internet giant missed revenue forecasts"

https://www.bbc.com/news/business-48099862

"Alphabet revenue dented by cooling Google ad business"

https://www.ft.com/content/01c12de0-6aa2-11e9-a9a5-351eeaef6...

"Google parent's shares dive as YouTube changes, competition hurt revenue"

https://reuters.com/article/businessNews/idUSKCN1S521N

reaperducer4• 7 years ago

Except it's not a Bloomberg story. It's numbers from Google's earnings reports, and every major financial publication is running similar reports.

Don't blame the messenger if you don't like the message.

https://en.wikipedia.org/wiki/Shooting_the_messenger

Animats• 7 years ago

At some point, we have to hit "peak online ads". There's a point beyond which ad vendors go down the road that killed Myspace.

dredmorbius6• 7 years ago

The shift from desktop to mobile also likely plays a role.

mochomocha4• 7 years ago

... but not in the direction you'd think. Mobile has been great for the advertising duopoly that is Google/FB.

mochomocha4• 7 years ago

Do you have any proof that Myspace was killed by advertising? Also, there's very little in common between Myspace and Google.

wongarsu• 7 years ago

Avertising has been around since at least the industrial revolution, I don't see why it should go away soon.

That said, we might be above sustainable levels of advertising, so the market might be forced to shrink (either voluntarily or involuntarily though ad blockers).

hn_throwaway_992• 7 years ago

The bar chart in that article, where the y axis apparently starts at 14% and change - it's really hard to think of journalists as sources of truth when they use such blatantly deceptive graphics.

xster• 7 years ago

I'm just here waiting for them to finish writing the supermicro chip story.

opportune• 7 years ago

Also, 14% YOY growth is still a great exponential growth rate for a maturing market

reaperducer4• 7 years ago

Reporters don't make the charts. It's the Wall Street Journal, not a blog. There's and entire art department for that sort of thing.

Also, charts like that are very common in financial publications. The target audience knows how to read them.

Edit: The original link was WSJ. It's since been changed to Bloomberg, presumably because of the Journal's paywall, but the point still stands.

massivecali• 7 years ago

How is the WSJ's credibility any better than a blog? >The Wall Street Journal is the most trusted news source in the country, according to the index, with 57.7% of Americans trusting it. All polls are biased based on how you ask questions. https://www.forbes.com/sites/tonysilber/2018/10/03/the-wall-... I'd say little more than half the poll is about as irrelevant as a blog. Either you trust something because of confirmation bias or you don't. Disregarding blogs as somehow being less credible, holds traditional media to a higher standard which they have chosen to abandon for partisan reporting over the past 10 years. Other random sources for comparison/counterpoints: https://mediabiasfactcheck.com/wall-street-journal/ https://poorvucenter.yale.edu/writing/using-sources/principl...

what_ever• 7 years ago

So you are saying reporters don't have any say in what images appear as part of their reports?

Also, this arts department you talk of - is still part of the reputed publication? Or does arts mean they don't follow the basic paradigms?

product506• 7 years ago

It doesn't matter who does it. What matters is as the end user reading that article this is pretty misleading. So from that standpoint, the journalist writing the article is implicated by default since he/she literally writes their name on the article. And frankly they should feel responsible for it.

wutbrodo• 7 years ago

Also, charts like that are very common in financial publications. The target audience knows how to read them.

Yea, I've never really understood this complaint. Except in publications targeted only at the most ignorant or innumerate audiences, it's ludicrous to claim that the only magnitude of change that can matter is one that's visible on a 0-100 scale.

Ignorant and innumerate audiences do exist, but this isn't a general-purpose argument against ever having enough respect for your audience that you can use the scale that lets you most accurately convey the data.

AznHisoka2• 7 years ago

That chart is grossly misleading for a lot of reasons:

- As you mentioned, axis starts at 14%.

- The units is percentage change rather than actual revenue.

- This is year over year percentage change! Which means it makes no sense having the x-axis be sequential quarters.

crazygringo2• 7 years ago

Sorry, but you (and parent) seem to be misinformed on all counts. This chart is both entirely normal and makes complete sense for anyone with a financial background, as can rightly be assumed for a Bloomberg or WSJ reader.

- Financial charts commonly don't start at 0%, e.g. look at any stock chart ever. No one ever assumes it does. This is to maximize clarity of differences, otherwise a lot of financial charts would have very small differences on top of very long bars, which would be much harder to read

- Percentage change is the correct metric when the title is "growth slows". If direct revenue were shown then readers would need to compare slopes rather than than heights, which is much harder, confusing, and less clear. (Direct revenue would be appropriate for a chart titled "revenue drops", but this story is about growth, not revenue, so that would be the wrong chart.)

- YoY percentage change is a normal metric to use on a quarterly or monthly basis precisely because it removes seasonal effects, see [1]. There is nothing nonsensical about it whatsoever.

This article and chart assumes a reader who is financially literate. It is not deceptive in any way, but rather follows best practices.

[1] https://www.investopedia.com/terms/y/year-over-year.asp

mochomocha4• 7 years ago

The title of the chart says "Google Ad Revenue Growth Slows". If it's about growth then the chart isn't really deceptive.

ilikehurdles5• 7 years ago

There would be no value to a chart that shows quarter-over-quarter growth, especially in a seasonal industry such as advertising. There is always a drop from Q4 to Q1 in ad revenue, simply because companies spend heavily on advertising around holidays.

I find it frustrating that so many of the suggestions in this thread for cleaning up these charts would actually lead to much more deceptive (even clickbaity) visualizations.

ilikehurdles5• 7 years ago

Maybe I'm an outlier, but I don't find properly labeled charts deceptive at all. There is no hard rule that all charts must have an axis at zero, and charts that fit this template are not necessarily more valuable or informative than those that don't.

dymk2• 7 years ago

There is no hard rule that all charts must have an axis at zero

Starting at something other than zero is like, the #1 thing that cable news channels do to make charts flashed on the screen for a few seconds look exaggerated.

And for a chart like the one shown in the article, there's no reason to not start at 0 unless you're trying to exaggerate the differences in values.

ehsankia2• 7 years ago

There is no hard rule that all charts must have an axis at zero

Of course, but the charts are a vehicle to show casing data, and this specific one intentionally misleads viewers. I'm not sure if it was due to ill-intention or ignorance, but charts like that go against everything charts are for in the first place.

dredmorbius6• 7 years ago

The major shifts in Google products, with numerous high-profile cancellations, have made me suspect weakening of fundamentals, or other threats, possibly regulatory or legal.

This news supports (though doesn't clearly prove) the former.

twblalock4• 7 years ago

Product cancellations are just part of Google's culture. They have been doing it for years, including at times when they had very good financial results. It is not a sign of anything other than Google being Google.

In particular it is the result of two unusual characteristics of Google's culture: work supporting legacy code is valued much less than it is at other companies, and launching a new product is by far the best way to get promoted.

DannyBee• 7 years ago

FWIW: The latter is often thought but this isn't really supported by data AFAIK (or at least any data i've ever seen computed on the subject)

As anecdote: My org has historically been one of internal infrastructure, maintenance, fixing apis, etc, and our promo rate is much higher than most orgs that launch products.

systemBuilder• 7 years ago

Yes, people get promoted for launching products, but they don't get un-promoted when the product fails 2y later, which most of them have, including 10O% of moonshots so far.

decebalus1• 7 years ago

two unusual characteristics of Google's culture: work supporting legacy code is valued much less than it is at other companies, and launching a new product is by far the best way to get promoted.

This has been the case at all companies I ever worked at. I don't think there's a place where supporting legacy code is highly regarded and ensures your promotion.

twblalock4• 7 years ago

Amazon's and Facebook's ad revenue have gone up significantly in the past quarter, so this is not a story about the decline of the online ad business. It is about Google not competing in that business as well as it used to.

eitally• 7 years ago

Not really. It's about Facebook & Amazon created compelling ad networks for to serve ads on their own platforms.

stone-monkey• 7 years ago

However, there isn't an infinite amount of advertising spend and consumer time on the internet - people who spend those things in Amazon and Facebook's + etc's ecosystems can directly and indirectly chip away at Google's advertising market share.

cobookman• 7 years ago

Amazon makes ~10B illion/year total in ad rev. Google makes ~130 Billion/year on ads.

15% growth on 130 Billion is 19.5 Billion.

Aka Google's yearly growth is larger than all of Amazon's Ad rev.

ec1096852• 7 years ago

For now…

dredmorbius6• 7 years ago

Amazon doesn't have to profit on ads. Amazon can profit on actual product sales.

Google lacks that luxury.

netwanderer33• 7 years ago

I always shit on Facebook in the past but I have to be honest, their ad campaigns don't require buyers to do keywords research which is often a major pain. In addition, they seem to know a lot more about their end users so it's easier to target the exact customer groups you want. Years of unethical privacy practices have probably given them certain advantages in this area. I was completely horrified when I learned you could upload a CSV list of all your customers email addresses and FB will match and display ads to this exact group.

At least on Facebook I feel like I personally have a little more control over how/when/where my ads will appear as opposed to Google's process where much of it is dictated by their algorithms. Not a fan of Facebook still but I can totally see why their ad products are working well for some businesses.

xbmcuser• 7 years ago

Google at it's value is still growing at 15% plus. I see some relation with Google growth and the world economy at large. This year the economy has been sluggish so are Google result.

product506• 7 years ago

Well - why did FB revenues grew faster then?

ehsankia2• 7 years ago

We're looking at growth of growth. It's a second order derivative, and it's inherently noisy. You can derive much conclusion from it.

paganel3• 7 years ago

Because FB is killing it with its Marketplace and because for a lot of people FB has become synonymous with the Internet. I’ve become an outlier among my circle of acquaintances because I still google the name of a specific restaurant or coffee shop we intend to go to, while my friends go directly on FB and search for the restaurant’s name in there (or even on IG to look at the restaurant’s most recent stories to see what its holidays open hours are).

clubm8• 7 years ago

Maybe we've reached Peak Advertising

http://peakads.org/images/Peak_Ads.pdf

product506• 7 years ago

No we haven't. Just because you have a narrative in mind doesn't mean it is true. If we had achieved peak advertising, other advertising companies such as FB should also show slow growth - but they aren't.

twblalock4• 7 years ago

Amazon and Facebook both announced advertising growth rates greater than 30% this week, so no, we are not at peak advertising.

tyingq2• 7 years ago

Google has everything above the fold as an ad for any lucrative queries. They may be at "peak ads" for search.

sytelus• 7 years ago

Quarterly reports are used for estimating second order derivatives aka growth of growth, which are very noisy. So friends don't let friends use quarterly reports without smoothing :).

That aside, one thing I have never understood is why Google shutdown their Product Search and then re-incarnated as some half-assed effort. When Google's product search was alive and well, I often used that for comparison shopping, finding related products etc. I'd hopped one day they would add integrated payment, inventory and offer a viable platform for lot of retailers who have no real IT departments to compete with Amazon. I also thought this was perhaps much higher valued search (intent to buy!!). Instead they shut down the whole thing. Now Amazon is the only well known comprehensive place for product search. It looks to me Google handed over one of the most lucrative search segment to Amazon on a silver platter and now we are seeing the result of that decision.

ec1096852• 7 years ago

They tried a bit of that with Google Shopping Express. Unfortunately that turned into a me too product versus when it launched you could get same day delivery from a variety of places.

strstr• 7 years ago

Yeah, evaluating stocks based quarterly reports accuracy always feels like a bit of a fools errand. The heuristic I use for dips in a stock is always “how many days of value did this erase?”. It keeps me sane when looking at large dips.

The most recent time Google was at this value was early April. The earliest time Google was at this value was July 2018. Google’s stock valuation has clearly stagnated a by that second metric, but definitely not by the first. This quarterly report didn’t encode much more than a bust of the pre-earnings run-up.

threezero• 7 years ago

Google shut down their product search because of antitrust issues. It took a while before they realized that they were about to get into real trouble. Hence the “half-assed” replacement.

nothis• 7 years ago

Really? In the US? Do you have any good article on that?

prepend• 7 years ago

The antitrust issues were that they were favoring their own results [0].

I would have used the site more if their response was to have a fair algorithm for results.

[0] https://techcrunch.com/2017/06/27/google-fined-e2-42bn-for-e...

tyingq2• 7 years ago

"Quarterly reports are used for estimating second order derivatives aka growth of growth, which are very noisy"

Perhaps, but they have shown double digit YoY growth that exceeds general internet growth for many years.

Personally I think it's largely because, for lucrative queries, everything above the fold is now an ad. Ads that have been tweaked and a/b tested to oblivion. Hard to grow on growth when your best trick is mostly played out.

mikepurvis2• 7 years ago

everything above the fold is now an ad.

Is this actually true? Assuming that the top queries are still things like "mortgage", "lawyer", etc, when I search those terms, my above the fold are a Google Maps box with local results, a Wikipedia box, and a single organic Yellow Pages link.

Now, "personal injury lawyer" is indeed all ads for me, but on the whole, I feel like I'm seeing fewer overall explicitly sponsored links than was the case 5-10 years ago.

hartator• 7 years ago

Unsure if that's you looking for but we built this: https://serpapi.com/shopping-results

jypepin• 7 years ago

It blows my mind to see a company of Google's size still having such huge growth. Incredible really.

onion2k• 7 years ago

Globally internet access is still growing at an incredible rate. Hundred of millions of people are accessing the web for the first time every year. It'd be really weird if Google wasn't seeing a lot of that growth affect their revenue.

jsty• 7 years ago

OTOH, a lot of those markets coming on stream might have a lot of "zero-rated" providers - Google makes a lot of money from ads when people search on the open internet. Less so when most of their activity is restricted to a few apps because consumers don't have to pay for the data use.

MarkMc• 7 years ago

Most of the people who are accessing the web for the first time are from poor countries like India and Indonesia, so the effect on Google's revenue is much smaller than the number of people would suggest. Other drivers of Google's growth are just as important: (1) People who are already connected to the internet are getting richer and are spending more time online; (2) Google continues to improve its algorithm matching advertisers to users

AFascistWorld• 7 years ago

Cashing in on goodwill.

roganp• 7 years ago

This. Google (and Facebook) can generate more revenue by leveraging the accumulated users personal information in more invasive ways, irritating their end users. They can sacrifice long term growth for short term gain (or not). I think some of this short term growth slowing is due to that - pulling back from the most egregious practices because of scrutiny.

joobus• 7 years ago

They may have achieved revenue growth, but net income was down significantly from last year, even excluding the EU fine.

https://files.catbox.moe/ud3wei.png

https://files.catbox.moe/qdrya3.png

https://www.sec.gov/Archives/edgar/data/1652044/000165204419...

microdrum• 7 years ago

Oh, it's because they're a monopoly. Google has a lot of products that people have to use because of the dominance of other products, platforms, or standards that Google controls. So as long as global growth is strong and more people are using the internet, Google will grow amazingly.

If, on the other hand, Google were in a competitive environment, you'd see it growing depending on whether its products were getting better and better.

But as observed in this thread, Google search is entirely ads above the fold. Gmail is becoming a Google controlled proprietary protocol. Etc. etc.

Yrlec• 7 years ago

Doesn't surprise me. The value of their ad products is deteriorating rapidly. For instance just today we found that one of our UAC campaigns, which supposedly is super smart and will automatically find the best channel for you decided to switch to a new channel with 14x higher CPC than the other channel that was working very well. That new CPC was 2x our target CPI. Why on earth they don't put in limits to prevent stupid bids like that is beyond me.

martinald• 7 years ago

Agreed, even on boring old paid search the new search suggestions are driving me crazy and I can't see a way to easily turn them off?

It's changed some very niche campaigns from CPC bidding to CPA bidding and performance dropped by about 2/3rds until I noticed and switched back. But it's trying to auto apply CPA bidding again. Losing the will to live fighting the endless BS Google throws at ads now.

rangerpolitic• 7 years ago

Isn't great that exact match doesn't mean exact match? Or, isn't it great that your ads and landing pages routinely outperform the supposed Quality Score? Isn't it great that...

AJ007• 7 years ago

(Going back over a decade) I guessed Google was under-monetizing, and then they could just keep slowly turned the knob, and the indicator was when they couldn't turn that monetization knob any more.

Google's Ad platform is at this point now. It has turned in to this jumble of UI anti-patterns and dark patterns. Each successive rollout of a new feature is basically, add more text we can test and relinquish your bidding control to us. At a slow, incremental pace this works. Eventually, however, they max out either what the advertiser can budget, or remove enough of the advertiser's ROI that it doesn't work any more. Then the risk becomes, rather than failing to grow revenue, that they actually collapse it.

One of the things that stuck with me the most, was many years ago Yahoo would go in and change the text of your search. That was egregious on many levels. The non-self service display ad networks would make you jump through a bunch of hoops to run a campaign and then make it as hard as possible to stop the campaign without it being fraud. Adwords, on the other hand had none of these problems. It worked fantastically. Not anymore.

peter_retief• 7 years ago

That makes sense to me, the ads seem to be more irritating and less appealing. I am unlikely to include them in anything I host because the value they add is negative

bartimus2• 7 years ago

Perhaps the new cookie regulations are specifically hurting Google's display network ads. Facebook and Amazon are perhaps less affected.

luckylion2• 7 years ago

GDPR has largely been ignored on the webmaster-side, so I don't believe that's a large factor. Especially since you can pretty much do whatever you did before, you just need to mention it in your privacy notice.

bartimus2• 7 years ago

Perhaps. Yet anytime a user clicks "no" to cookies it means Google won't be able to show targeted ads. But I'm purely speculating here.

devy• 7 years ago

I am surprised that no one mentions about their Waymo / Verily revenue potentials. I genuinely believe those will have even bigger potentials than ad sales for Alphabet.

netwanderer33• 7 years ago

Elon Musk recently said LIDAR system was just too expensive and unnecessary as he's betting on using Tesla's video cameras for their own automated driving. I guess we'll have to wait and see.

Zigurd• 7 years ago

That's a nearly unique position among autonomous vehicle people. He's correct about LIDAR costs, for now. The question is: "How long is 'now?'" Unless there is something fundamentally wrong with the idea of MEMS LIDAR, Musk's statement is something like "Rotating memory will never be cheap enough for X" when SSDs are coming.

Reedx• 7 years ago

That does seem likely, considering humans don't have LIDAR...

Also Cornell University may have just proved this out: https://interestingengineering.com/cheap-cameras-might-be-ju...

usr1987• 7 years ago

more intrusion coming soon to sell you more useless crap!

netwanderer33• 7 years ago

So I guess Google has been holding off revenue potentials from Google Maps all these years for this moment.

treis• 7 years ago

"Continues slump" is a funny way of saying "up 20% since January".

Google Continues Slump After Ad Revenue Growth Slows

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