Alphabet witnessed drop in share after missing the revenue forecast. According to Ruth Porat, Alphabet CFO, the modifications in the YouTube algorithm resulted in a decrease in engagement and ad revenue on the site, its slowest growth in last 3 years. She also pinned it on fluctuations in currency, unspecified product changes and fierce competition. In a statement she opined “the company was experimenting with its ad products as users grow reliant on mobile devices and that it was seeing revenue volatility as a result. Sales of Google’s Pixel phones also struggled amid intense competition in the premium smartphone market.”
A lion’s share of Google’s revenue came from the ad business(According to eMarketer, Google’s 3 billion users help make it the world’s largest seller of internet ads, capturing nearly a third of all revenue) and hence YouTube is one of major reasons for the dip in revenue in the first-quarter earnings report. Google was also fined €1.5 billion by European Union for inequitable advertising rules in March this year. There was a percent decrease in paid clicks as well. The profit from business operations for the internet behemoth came down to $6.6bn from $7.6bn.
The company is optimistic about the future despite the current slowdown as CEO Sundar Pichai is of the view that variations might happen on a quarter to quarter basis especially when a company focuses on the long term. CFO Ruth Porat also said in a statement “The timing of product changes in ads at times can have an impact on year-on-year growth rates.” “We will continue to make changes with a focus on the long-term best interest of users and advertisers” she added.
The company came short of the analysts’ expectations while the other major players like Facebook and Amazon either matched the predictions or surpassed them. Facebook recorded revenue of more than $15 billion in the first quarter of 2019 and Amazon showed a consecutive growth in last four quarters as well.