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Google parent shares dive as YouTube changes, the competition hurt revenue

(Reuters) – Alphabet Inc Google on Monday experienced the slowest growth of the turnover in the next three years, increased competition in advertising, stumbles in the smartphone business and far-reaching changes in YouTube that on the left of the leading internet ad company, lagging rivals.

FILE PHOTO: The Google logo is pictured at the entrance of the Google offices in London, Britain, 18 January 2019. REUTERS/Hannah McKay

Shares of the Alphabet slumped 7.5 percent after hours, in which they for the biggest one-day decline since the fall of 8 percent in October 2012. She had closed Monday at a record-high of $1,296.20.

Alphabet Chief Financial Officer Ruth Porat attributed the slower growth of the revenue to currency fluctuations, competition and non-specified product changes.

The company is with persistent pressure from advertisers to tighten checks on the fast-growing YouTube-video-service, so they do not appear to the sponsor of an adult or offensive content.

Google also struggled to find the right mix of ad formats to use on mobile devices, the voice assistant compatible speakers and in the emerging markets.

Eight of the 11 analysts who surveyed managers at a call on Monday, asked about the revenue problems, an unusual degree of shared interests. But the executives offered limited new details, which Barclays’ analyst Ross Sandler in the vicinity of the end of the preface a question by saying that he is only beating a dead horse.

Look at the sales slowdown, Porat said unspecified changes on YouTube had benefited in the first quarter sales a year ago, with nothing to deliver a similar bump this year.

Approximately 85 percent of the Alphabet ‘ s revenue comes from Google’s ad business, which sell links, banners and commercials about its own websites and apps, and partners.

Chief Executive Sundar Pichai said sales delays are expected as the company focuses on the long-term.

“You’re going to have quarter-to-quarter variations once in a while, but we remain confident about the opportunities that we see,” he said on a conference call.

The main competitors for the ad-expenditure such as Facebook Inc., Snap Inc, Amazon.com Inc and Twitter Inc all reported last week, at a quarterly revenue above or in line with the expectations of analysts.

Alphabet said the quarterly revenue increased 17 percent compared to a year ago to $36.3 billion, $1 billion short of Wall Street’s average estimate, according to the IBES data of Refinitiv.

The company said that it would have met expectations, adjusted for currency fluctuations.

The growth was the lowest since the 17 percent in the first quarter of 2016, compared with 26 percent for the same quarter in 2018.

Facebook, the No. 2 internet ad company, posted 26 percent growth for $ 15.1 billion in the quarter results of the past week. [nL3N2264UK]

“Google ad revenue growth slowing down in the middle of the downward pressure on the price of the ads, in particular, with the revenues coming from the international markets,” Monica peart, senior forecasting director of ad research firm eMarketer said in a statement.

RISING COSTS

Alphabet s per quarter, costs increased by about the same as the revenue, up 16.5 percent over last year to $29.7 billion.

Expenditure rose faster than revenue for a large part of the past two years while adding data centers, offices, and YouTube content-licenses with respect to some investors amid increasing scrutiny on the company’s privacy policy, and advertising restrictions on YouTube.

Advertising more checks to come on YouTube in the coming weeks, which could have an impact on the sales, Pichai said.

In the first quarter, sales of Google’s Pixel phones also trouble of the fierce competition in the premium smartphone market, Porat said. The company expects to introduce lower-priced Pixel devices next month.

Alphabet has yet to tout significant revenue from its expenses to businesses like self-driving cars and the AI helper Google Assistant.

Newer units that produce noticeable turnover remained behind in market share, including Google ‘ s consolidated hardware unit and Google Cloud, which sells computing and data storage services to businesses.

And Google’s cost would be able to jump further as governments around the world to follow through on threats to rein in the ability of apps to track users for advertising purposes. Other supervisors have discussed is forcing companies to step up monitoring of the user content. The costs will rise in the current quarter Google resume some marketing efforts, Porat said.

Shares of the Alphabet have gained 23 percent this year as positive macro-economic signals gave investors reason to bet on it. But it is the least growth among the so-called FAANG group, with Facebook, 48 percent, Netflix is 39 percent, Apple’s 30 percent and Amazon at 29 percent.

EUROPEAN FINE

Alphabet’s expenses included a $1.7 billion fine from the European Commission for the placing of anti-competitive advertising restrictions on sites with the help of the search queries.

Google’s 3 billion users, to help create the world’s largest seller of internet advertising, capturing nearly a third of all income, according to research firm eMarketer. Facebook is about 20 percent.

Including the European fine, net income was $6.7 billion, or $9.50 per share, compared with analysts average estimate of $7.3 billion, or $10.48 per share. Profit, excluding the fine amounted to $8.3 billion, or $11.90 per share, beating analysts estimates of $10.61 per share for the ordinary result.

Operating margin excluding the penalty was 23 percent, an increase of 22 percent in the year-ago period.

Reporting by Arjuna Panchadar in Bengaluru and Paresh Dave in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker

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