Briefing: Alphabet (Google)
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10 The Sunday Times July 30, 2017 BUSINESS BRIEFING ALPHABET (GOOGLE) TECH BUBBLE DANNY FORTUSON Facebook’s stratospheric last week, are able to do so to be the go-to place for average price per ad unit rose THE ISSUE THE ANALYST growth is confounding until means that many advertising people to chat with customer by 25% in the latest quarter. COSTLY TRAFFIC WILL HEFFERNAN, CANTOR We’re the you stop and think about it. rivals are rapidly heading service bots. There is another factor at How is it that the company towards zero, from magazines Facebook, however, is play here: the more people Alphabet, parent of Google, released This was the third consecutive quarter that runs ads for Coca-Cola and newspapers to television significantly more powerful Facebook brings into the fold, second-quarter results last week that that traffic acquisition costs rose free fuel and Ford and Walmart is ads. (Google’s profits took a than those old services the smarter its algorithms get were generally solid but highlighted a as a percentage of ad revenue. This worth more than the three of hit, though, because of the because no matter where you at predicting what individuals significant increase in costs. implies a trend of rising traffic them combined? €2.4bn antitrust fine imposed are, it can find you — and want and when, making it Earnings per share for the quarter acquisition costs, which may Because all the old-guard by EU regulators.) send targeted ads. Businesses harder for other companies came in at $5.01, comfortably ahead of ultimately lead to pressure on margin powering companies are stuck trying to Last year the duopoly of don’t lose sight of you when to compete. And when market estimates of $4.45. Clicks on and average ad prices. However, the sell their stuff to us, and have Google and Facebook took you move home, for example. potential rivals do crop up, its ads were up 52% but the average results were still strong. to spend mightily to do so. 99% of the growth in For advertisers, the ability Zuckerberg simply buys price paid for ads declined by 23%. Earnings had a substantial beat and Facebook Facebook has flipped that advertising spending in to sink their claws into us no them, as he did with Traffic acquisition costs, the the monetisation potential from dynamic on its head: you and America. You can understand matter where we are or what Instagram and Whatsapp. percentage of ad revenue paid to YouTube’s 1.5m user base is huge. I are the product, and why. Facebook has become we are doing — nearly 90% of He need have little concern third-party partners that direct users It also won three times as many Facebook is selling us — or like the Yellow Pages — the Facebook’s turnover comes about Washington stopping to Google websites or ads, rose from cloud-based enterprise systems deals more specifically, rich, place where you can find just from mobile ads — is him. The Federal Trade 21% to 22% of revenue. This has as it did last year. targetable data about us — to about anyone, as well as cat irresistible. Which is why Commission, America’s increased as people move We believe YouTube’s potential, the fusty companies named videos and political screeds. Facebook can get away with antitrust watchdog, is missing increasingly to mobile browsing. The cloud momentum and mobile search above. Best of all: we’re free. Its Messenger platform aims jacking up its prices. The three of its five chiefs. And, other big negative was the European growth should be enough to offset It is an amazing model that just to be safe, Facebook is on Commission fine of $2.7bn (€2.3bn) headwinds from increased costs and has allowed the 13-year-old course to break its record for for an alleged abuse of its dominance declining ad prices. company to steamroll spending on lobbyists, forking in the search engine market. business maxims, such as the out $5.6m so far this year. Google law of large numbers, which All this has Wall Street very states that the bigger you get, excited. Morgan Stanley last THE BOSS $1,000 the harder it is to move the week upped its price target needle. Growth slows. for the company from $175 a SUNDAR PICHAI 950 Not in Facebook’s case. share to $190, despite Sundar Pichai has been chief Last week, Mark Zuckerberg’s Facebook saying that revenue executive of Google since October 900 empire posted another set of may slow due to its declining 2015. Previously, he led the product dazzling figures: in the three desktop business. Shares management and innovation efforts 850 months to June 30 turnover closed at $172.45 on Friday. for a suite of Google’s search and rose to $9.3bn (€7.9bn), up Morgan Stanley is excited consumer products, including 800 45% year on year, while because, in its words: iGoogle, Google Toolbar, Google profits surged 71% to $3.9bn. “Facebook’s ad rev growth Desktop, Google Pack and Google 750 Its core Facebook domain has and incremental margins Gears. notched up 2bn users, while highlight how early it is in the Jan Feb Mar Apr May Jun Pichai has more than 15 years of its Whatsapp messaging platform’s monetisation and experience in developing hi-tech Source: Yahoo platform has 1bn daily users. potential earnings power.” consumer and enterprise products. Share price: $941.53; Market cap: The business’s market value Which comes back to you He received a BTech from the Indian $653bn (€556bn); EPS: $40.51; has ballooned to $494bn. and me. Like steel for Ford or Institute of Technology and holds an DPS: N/A; Top five shareholders: Companies this big aren’t corn syrup for Coke, we are MS in engineering and materials Vanguard, 6.68%, Blackrock, 6.06%, supposed to be capable of the commodity that the science from Stanford University, as Fidelity, 5.8%%, State Street, 4.01%, growing so fast. The fact that whole empire runs on. well as an MBA from the Wharton Capital Group, 2.8% Facebook and even larger Except, unlike those School of Pennsylvania University. tech giant Google, which feedstocks, we’re free. posted a 21% rise in turnover Zuckerberg: size no obstacle to growth for Facebook empire @dannyfortson ISEQ FTSE 100 42 84.54 0.62% 1.13% H:7,157.43 H:7,599 DATABANK 6,663.49L:5,711.5 7,368.37 L:6,615.8 IRISH SHARES THE WEEK IN THE MARKETS THE ECONOMY change Mkt cap RISERS Consumer price index current rate annual change Rank by Mkt Cap € on wk high low yield P/E (€M) 7,250 DOLLAR Zamano: 6c, U 44.7% EUR > USD 0.1% -0.4% 1 Abbey 14.28 –0.14 15 11.85 1.27 7.8 306.2 31 Kennedy Wilson Europe (£) 11.53 +0.52 11.57 9.14 4.16 14.7 1454.3 Tullow Oil: £1.72, U 14.25% 6,750 Independent News & Media: 11c, U 6.8% Residential property price index current rate annual change 2 Allied Irish Banks 4.94 +2.68 9.5 4.4 2.95 12.55 13406.3 32 Kerry Group 75.45 –1.1 81.59 61.03 0.86 20.72 13287.8 2.2% 11.9% 33 Kingspan Group 28.38 –1.29 33.1 20.55 1.38 17.31 5082.3 3 Aminex 0.03 –6.06 0.09 0.01 0 62.09 112.9 6,250 FALLERS $1.17 Vehicles licensed for the first time June 2017 annual change 4 Amryt Pharma (£) 0.22 +2.3 0.3 0.13 0 – 46.4 34 Mainstay Medical International 16 +0 16 14.2 – – 105.8 Great Western Mining: 2c, V 25% U 0.01 5,856 -10.5% Permanent TSB Group: €2.13, V 13.5% 12-month high: $1.17 Average earnings per week prev. quarter qoq change 5 Applegreen 5.35 –1.65 5.44 4.02 0.35 21.13 432.4 35 Malin Corporation 12.5 +2.88 14.4 9.61 – – 529.1 5,750 Hostelworld: €3.24, V 6.1% low: $1.03 €717 €714 0.4% 6 Aryzta 27.2 –2.33 42.9 24.62 1.43 11.5 2414.2 36 Mincon Group 1 –0.99 1.1 0.59 2 20.51 210.5 POUND 5,250 Unemployment on last month annual change 7 Bank of Ireland 6.96 +0.59 8.04 4.74 3.08 11.09 7509.7 37 Origin Enterprises 6.65 –1.34 7.58 4.92 3.16 14.23 835.1 EUR > GBP MFJDNOSA J JMA 139,400/6.3% -4,800 -46,928 8 C&C Group 3.03 –4.42 4.2 2.99 5 13.01 938 38 Ormonde Mining 0.02 +1.25 0.04 0.01 – – 7.7 Source: Yahoo Manufacturing output current rate annual change 39 Ovoca Gold 0.1 +0 0.21 0.08 – – 7.7 9 Cairn Homes (£) 1.63 +2.03 1.67 0.93 0 34.49 1178.5 £0.89 2.4% 6% 10 CPL Resources 5.9 +0.85 6.3 4.8 2.15 10.89 182.2 40 Paddy Power Betfair (£) 75.85 +0.6 100.29 73.4 2.79 18.08 6398.3 DOW JONES CAC 40 Retail sales current rate annual change 21,830.31 5,131.39 W 0.00 11 CRH 29.73 –1.88 34.87 26 2.34 15.47 24847.6 41 Permanent TSB Group 2.13 –13.56 2.96 1.81 0 9.52 968 12-month high: £0.90 4.8% 4.1% 250.24 H:21,841.2 13.73 H:5,442.1 low: £0.82 12 Dalata Hotel Group 4.92 –0.69 5.35 3.75 0 14.23 903 42 Petroneft Resources (£) 0.02 +1.2 0.04 0.02 0 – 14.9 1.16% L:17,883.6 0.27% L:4,293.3 Irish trade latest month prev.