Through it all, the company managed to produce strong financial results with the numbing consistency of the New England Patriots in the Super Bowl.
On Monday, Alphabet said revenue rose 22 percent to $39.27 billion in its most recent quarter, while profits swung to $8.95 billion. Last year, Alphabet reported a loss after it took a $9.9 billion charge for the repatriation of foreign earnings after changes in the tax code.
Alphabet’s financial consistency is easily explained. Google owns the internet’s ultimate beachfront property, the starting point for a lot of internet activity, whether it’s someone looking for entertainment on YouTube or hunting for product information on the Google search engine.
While Facebook and Amazon are formidable competitors, Google is the top destination for marketers looking to reach consumers online. It accounted for 31 percent of digital advertising around the world last year, according to the research firm eMarketer.
Google said advertising revenue from “Google properties” like search and YouTube was $27.02 billion in the fourth quarter, up 22 percent from a year earlier.
The company’s ad business is shifting as more consumers use mobile devices for access to the internet. Alphabet reported a 66 percent increase in clicks on its ads, although the revenue per click fell 29 percent during the quarter. In other words, people are looking at Google’s ads more often, though the price of those ads is dropping.
Mobile ads cost less than ads viewed on desktop devices. But the company has offset that decline because search ads take up more screen space on mobile phones — making it more likely users will click on them.
Alphabet’s quarterly results beat Wall Street’s estimates, but the company’s share price was down about 2.6 percent in after-hours trading on Monday.
If there is a cause for concern, it is Google’s rising costs. In order to maintain a foothold on smartphones, Google pays smartphone manufacturers like Apple billions of dollars to be the default search engine on their devices.
Alphabet is also spending more to acquire content for YouTube, market new hardware products and build new data centers and other sorts of technology infrastructure.
On a conference call with analysts on Monday, Sundar Pichai, Google’s chief executive, said investments in building and expanding data centers were “an important long-term investment” for future computing needs as the company rolled out new technologies like artificial intelligence.
In 2018, Google’s costs and expenses grew 30 percent, outpacing the 23 percent increase in revenue. The company’s capital expenditures nearly doubled in the past year to $25.14 billion.
Alphabet has continued to hire aggressively. It had 98,771 employees as of Dec. 31, compared with 80,110 workers a year earlier.
Ruth Porat, Alphabet’s chief financial officer, has pushed the company to be more mindful of its costs — calling for more fiscal discipline at units like X, Google’s research and development arm. But her cost-cutting push has raised concerns among Google’s vocal employees.
Last week, Google had to address a spreadsheet created by its human resources department in 2016 — the year after Ms. Porat joined the company — that raised the possibility of cost-cutting measures like promoting fewer employees and scaling back some of the company’s famous workplace perks.
At a weekly employee meeting, Google management responded to sharp criticism from employees about the spreadsheet, saying that it was a brainstorming exercise and that most of the proposals were never considered.
Orignially published in NYT.