The stock of Alphabet Inc (NASDAQ:GOOG) closed at $980.34 gaining 0.76% in yesterday’s trading session. On Monday, the company announced its second quarter earnings. The 3% decline that followed was a cause for alarm worrying a lot of the parties that have been closely following the company’s progress.
There has been great need for the company to give an explanation regarding this particular phenomenon. A lot of speculation has been going on recently. A lot of people purport that it might have resulted from increased traffic acquisition costs (TAC).
It is clear that Google is being compelled to share some of its mobile ad revenue with a wide range of partners. These are as a matter of fact the partners that draw users from across the board to its search engine. They might also be those partners that have shown much commitment in running Google ads on their respective websites.
In a recent interview, one analyst disclosed, “It appears that product mixes including the changes in the kinds of inventory that Google sells via its networks (for example brand safe and viewable ad inventory, especially including video) could be causing Google to incur higher costs than was previously the case.” Macquarie analyst Ben Schachter pointed to Google’s Q2 net revenue as a “meaningful deceleration.”
However, no one needs to see this as the end of the world. It is indeed true that there have been numerous changes to Google’s business model. This is in close consideration to the fact that much of its search traffic emanates from mobile devices like iPhones. This compels Google to share part of its accumulated revenue according to Yahoo.
Ruth Porat, Alphabet’s CFO has made an important note regarding the provider’s earnings call. This was on Monday and she outlined that they anticipated the traffic acquisition costs to continue rising up.
She added that the rise in the number of the mobile searches and programmatic advertising culminated in the rising TAC. However, Porat termed it a positive move saying that it in a major way boosted the number of users going for Google’s service.
