Earnings: Can Google sustain its ad juggernaut?
Not even Alphabet could escape the wrath of investors “penalizing shares of firms that miss earnings expectations,” said Amrith Ramkumar and Rob Copeland in The Wall Street Journal. The parent company of Google and YouTube, typically a stock market darling, fell $1 billion short of revenue forecasts for the first quarter, but executives “wouldn’t say much about the reasons for the slowdown.” Alphabet’s long-standing lack of transparency makes investors wary of a “surprise to the downside,” and markets sent shares to the company’s worst day since 2012. Google has been beset by staff discontent, and this week its former CEO, Eric Schmidt, announced he is leaving the board.
A slowdown in ad sales is likely the culprit here, said Gerrit De Vynck and Mark Bergen in Bloomberg.com. Google said growth in advertising dropped to 15 percent from a year earlier, compared with 24 percent in 2018. How come? The purge of thousands of videos and changes to the recommendation algorithm on YouTube didn’t help, since “fewer ads mean fewer clicks.” But for years “analysts have fretted that Google would max out search ads,” as more people search on their phones, where space is limited. “Google has always proven them wrong”—and will need to again. ■