Why We Don't Care About the "YouTube Problem" in Google Earnings

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Shares of Alphabet have gained 23 per cent this year as positive macroeconomic signals had given investors reason to bet on it.

Alphabet executives on Monday deflected concerns of growing competition on a conference call with analysts, instead suggesting that fluctuating currency rates and changes to Google ad products during the quarter led to the slowdown.

Google shares were down 7.2 percent to US$1,202.39 in after-market trades that followed release of the earnings report. Analysts polled by FactSet expected revenue of $37.3 billion.

While Google has dominated the online ad market for nearly the entirety of its existence, its first-quarter earnings report suggests that competitors may be nipping at its heels. The company is looking to match up its pace with other giants such as Microsoft Azure and Amazon Web Services, and that is why it has spent more on strengthening its cloud business.

According to the report, Alphabet's total revenue for the first quarter is $36.339 billion, an increase of 17% from $31.146 billion in the same period past year.

Alphabet had 103,549 employees in the first quarter of 2019 - up from 85,050 employees in the same period a year ago. However, the rise was the slowest since 2016 and compared with growth of 26% for the same quarter a year earlier. Google continues to be one of two dominant players in digital advertising.

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Google advertising revenue rose by 15% to $30.7bn, down on 24% growth a year earlier. The firm owned 3,507 shares of the information services provider's stock after selling 1,652 shares during the quarter.

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Google's three billion users help make it the world's largest seller of internet ads, according to market research firm EMarketer. Facebook is at about 20 per cent.

Google's capital expenditure: $US4.6 billion, compared with $US7.3 billion during the same period previous year. In this year's same quarter, its growth decelerated to 17%.

Alphabet has yet to tout significant revenue from its spending on ventures such as self-driving cars and its AI helper Google Assistant.

However, maturation of the digital ad market is likely to mean slower sales growth for companies like Alphabet, which hasn't developed other major sources of revenue, such as cloud computing and smartphones.

Cost-per-click on Google properties: -19%. Facebook comes in at No. 2 with a 27.1% share.

Google's margins were pinched by a $1.7 billion fine levied against Google by European regulators last month for abusing dominance of its search engine and limiting competition.

Alphabet also saw an income boost from its stake in ride-sharing app Lyft, which went public last month. "In fact, when we cleaned up our partner program to remove bad actors last year, we made it clear that 99% of those impacted creators were making less than $100 a year". During the same period past year, the company earned $9.70 earnings per share.

Alphabet's earnings would have been $11.90 a share if it weren't for the $1.7 billion fine.

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