Alphabet tumbles most since 2012 after sales growth disappoints

By Bloomberg | 01 May 2019 at 09:16hrs
Alphabet Inc tumbled the most in almost seven years after first-quarter revenue missed analysts' estimates and sparked fears that advertisers are shifting some spending to digital rivals away from Google.

A lack of answers on Alphabet's earnings call led to "frustration" for investors, Jefferies analysts wrote in a note. The stock fell as much as 8.6% Tuesday, the most intraday since October 2012, and traded down 7.6% to $1,197.85 at 9:37 a.m. in New York.

Sales came in at $29.5 billion, excluding payments to distribution partners, Alphabet said in a statement on Monday. Wall Street was looking for $30.04 billion, according to the average of analysts' estimates compiled by Bloomberg.

Revenue from Google advertising rose 15%, the slowest pace since 2015. That was a stark contrast to scandal-plagued Facebook Inc., which last week reported a 26% jump in ad sales.

Chief financial officer Ruth Porat attributed the slowdown to currency fluctuations and the timing of product changes, though she didn't explain which products and why that would hurt growth. On a conference call after the results, analysts repeatedly asked for more details, to the point where Ross Sandler from Barclays said he was beating a "dead horse" by asking again.

Ad revenue growth was solid on mobile, but barely present on desktop and tablets, according to data gathered by digital marketing agency Merkle. That contributed to the overall slowdown, Merkle's associate director of research Andy Taylor said. "It's unclear how Google might be able to ramp growth back up on these device types," he said. "A lot of the low-hanging fruit has long since been plucked."

Another concern is whether competition is starting to limit growth. Google's search engine is usually the first place consumers go when looking for products, letting the internet giant charge premium prices to retailers and other advertisers looking to reach customers online. But people have been increasingly going straight to Inc. to hunt for products and the e-commerce giant has been grabbing a larger share of the digital ad market, chipping away at Google's lead.

In an interview with Bloomberg TV, Porat shrugged off Amazon's foray into advertising and said there's still lots of room for growth for all digital ad companies because so much marketing money is still spent offline.

"Nearly half of ad budgets in the U.S. are still spent offline," Porat said. "Ninety percent of commerce in the U.S. is offline and we are focused on digital playing a big role in that."

The number of clicks on Google ads rose just 39%, the lowest year-over-year growth since 2016. The price, or cost per click, fell 19%.



WhatsApp Newsletter

Follow us

Latest Headlines