There are two growing concerns that management at Google must face as earnings season is in full swing, and that is the rising competition from Amazon as it increases its presence in digital advertising and the second is the cost of doing business continues to increase. Despite solid releases for the earnings season, Alphabet (parent of Google) which reported fourth-quarter results on Monday that beat expectations is all major areas reported. The company is doing fine.
Cost per click which is one way of measuring the amount Alphabet charges advertisers for each click dropped from 29 percent from last year and 9 percent from the last quarter. This indicates that, with the Amazon challenge fulling in place, the procing power for ads is eroding. Google will be challenged going forward.
Revenue was reported at $39.28 billion versus $38.93 billion for consensus estimates according to Refinitiv. Alphabet reported much higher than the expected $5.63 billion in capex, which reported $7 billion. The company showed an operating margin of 21 percent for the fourth quarter.
It seems that the company has hit a plateau for core advertising. This seems to be the case for other social media and tech companies and we at Classiarius feel that the amount of free money that these firms enjoyed in the past will not be as abundant in the future. Competition in Silicon Valley will intensify, these players will be forced to face off, likely impacting their current free speech stance.