AI Biweekly: Alphabet Q3 Revenue Disappoints Investors; Facebook Hires Nick Clegg as Global Strategist

Biweekly Review

Ivan Zhou – Analyst, Global Industry

Google

Alphabet disappointed investors by not making money as fast as expected. Alphabet’s Q3 revenue was up 21% compared with Q3 2017 with 86% of the total revenue coming from ads. This means ads business unarguably remains Alphabet’s top cash generator and it is still growing. However, Alphabet’s other revenue, notably its Google Cloud and hardware businesses, saw only 29% growth, compared with 37% growth in the previous quarter. As the most promising part of the company’s business, the growth of cloud and hardware is not as high as it should be. As the competition for online ad business grows more and more fierce, Google/Alphabet is desperately looking for an alternative business engine in addition to its ad business. As a result, executives have put emphasis and stakes on their cloud and hardware areas. It seems they still need more fuel and strategies to power the growth.

October 26 – Alphabet Reports Its Q3 2018 Results

In Q3 2018, Alphabet’s revenue increased by 21% YOY to US$33.74 billion, with 86% from ads. Total revenue was US$310 million below analysts’ expectations.
According to CFO Ruth Porat, the revenue growth came mainly from mobile searches; however, that also increases the cost of traffic acquisition paid to Apple and other phone makers.
http://www.qdaily.com/articles/57731.html
https://9to5google.com/2018/10/25/alphabet-q3-2018-earnings/

Nicholas Richard – Analyst, Global Industry

Facebook

Facebook’s high profile hiring of former UK Deputy PM Nick Clegg into its strategy team is indicative of one thing — the fear of impending regulations. Although the UK’s recent fine over the Cambridge Analytica scandal was a laughable slap on the wrist, the EU’s new GDPR regulations puts the company at a much greater regulatory risk on the Continent as fines can reach upwards of 4% of revenue under the new laws. Nick Clegg was hired with the promise that he would be contribute to the company’s strategy. How well this promise is kept and how much Clegg is willing to compromise his past criticism of the social network will be one of the many interesting factors that shape the company’s future as it finds itself less and less untouchable in the realm of politics.

October 25 – Facebook Gets Maximum Fine Over its Big Data Scandal. It Won’t Even Notice

The UK government has fined Facebook with its maximum penalty of £500,000 (US$640,000) over the company’s mishandling of customer data in the Cambridge Analytica Scandal.
The fine is regarded as a trifling amount, and Facebook has yet to agree to pay it. However under new GDPR laws, a similar penalty in the future could amount to a fine of over US$1 billion for the company.
https://edition.cnn.com/2018/10/25/tech/facebook-fine-data-scandal/index.html

October 19 – Facebook Hires Nick Clegg as Head of Global Affairs

Former UK Deputy Prime Minister Nick Clegg is now now Head of Global Policy and Communications at the social network giant and will move to Silicon Valley in January.
It’s alleged that CEO Zuckerberg had to charm the UK politician for months and promise him a major role in shaping the company’s strategy to get him on board.
Clegg has been critical of Facebook in the past and has said he will be pushing the company to do a better job paying its taxes.
https://www.theguardian.com/technology/2018/oct/19/facebook-hires-nick-clegg-as-head-of-global-affairs

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