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Alphabet Announces Second Quarter 2019 Results [pdf]

127 points| mrep | 6 years ago |abc.xyz

147 comments

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[+] 11thEarlOfMar|6 years ago|reply
Revenue is up 19%.

Net income up >300%.

Most of the revenue and profit from ads.

Stepping back for a minute, political polarization has be increasing for about the length of time that Google has been in business. I'm not claiming Google is the cause, but rather that Google's tenure is a proxy for an acceleration in political polarization. [1]

Polarization enables outrage. Think Antifa vs. Proud Boys. Pelosi vs. Omar. AOC vs. ICE. Outrage reduces the amount of critical thought people put into the information they see and use to draw or reinforce conclusions they have about other groups, in particular, their polar opposites.

Outrage drives clicks, shares, likes and retweets. Clicks, shares, likes and retweets drive views, views drive ads, ads drive revenue.

Now, toss neural nets into the cycle. Neural nets do in fact learn and improve as feedback loops transpire.

Why wouldn't we expect these systems to learn that among other things, information that increases polarization results in the desired goal of increasing revenue, absent of any deliberate intervention by human beings?

[1] https://www.allsides.com/blog/political-polarization-america...

[+] asdfasgasdgasdg|6 years ago|reply
> Why wouldn't we expect these systems to learn that among other things, information that increases polarization results in the desired goal of increasing revenue, absent of any deliberate intervention by human beings?

This is all well and good, but revenue is not an input to most machine learning algorithms at Google. First off, there is a pretty serious firewall between search and ads, so any organic results will be completely oblivious to revenue. Search systems literally do not have access to that kind of information. Even within ads, the concept makes sense only if you don't think about it too much. The big money-maker ads are when someone is trying to buy something. Ads around viral content are just not something that people can pay much for, because the margins in the news business are very thin.

Now if you want to make an article that the media has learned that spectacle and outrage drive clicks, I am here for it. (But this has always been true. Yellow journalism was a thing more than a century ago.) And I guess you can make an argument that Google facilitates this by pointing you to the media, and by participating in the feedback loop. But I don't think Google revenue is as causally linked to outrage as you seem to believe. After all, correlation usually doesn't indicate causation.

[+] cromwellian|6 years ago|reply
It rose after cable deregulation, which gave us 500 channels and dozens of 24/7 outrage outlets.

There was plenty of outrage going around on Fox and Rush Limbaugh talk radio before Google. Remember, Roger Ailes pretty much planned for a lot of this.

[+] bartimus|6 years ago|reply
Since neural networks train using the data of the masses I would exactly expect the effect to funnel towards consensus as opposed towards controversy. Let autoplay run long enough and eventually we all get the same videos.

I think there's plenty other explanations for the current political climate. It has perhaps moreso to do with how the media was previously controlled by small number of big players versus the many smaller players we have today with more extreme views.

[+] samirillian|6 years ago|reply
Yeah, the ironic part is that roi for advertisers on google search is low to negative. Not only does google sell its keywords, thus perverting the index itself, they also fleece the advertisers who seem to do buys solely to "keep up with the joneses". Most actually results-based advertising will avoid organic search buys; but most digital marketing companies are not results-based.
[+] anthony_doan|6 years ago|reply
I use ad blockers so I don't how this theory would explain people with ad blockers that are political.

Neural network is bias because of the data. It's always the data. gfycat has an article about this. They have a huge user base that's into kpop and their training dataset didn't have much Asian people in it so it kept on identifying kpop star as women.

[+] anilshanbhag|6 years ago|reply
I would say it is the rise of digital media. Newspapers had a captive audience, now in the digital world everyone has to compete for attention.

Google rise happened at the same time as digital media - both coinciding with rise of internet.

[+] idlewords|6 years ago|reply
There's an entire research field that works and publishes on this.
[+] rhacker|6 years ago|reply
Google/FB etc makes a lot of money for (mostly) liberal people by making as many people as possible non-liberal. In the future the ML's sole job will keep that momentum going but will be trained on perfecting _exact_ ratios of polarization that's needed to prevent a civil war. In other words fine tuning where that tipping point maximized profit at an acceptable level of violence.
[+] Despegar|6 years ago|reply
>On July 24, 2019, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $25.0 billion of its Class C capital stock

The reason the stock is up so much. They're going to stop blowing money on stuff they aren't good at.

[+] seldonnn|6 years ago|reply
That’s 3% of market cap, try again on your explanation. Hint: accelerating revenue growth
[+] snarf21|6 years ago|reply
EDIT: Apologies, I was incorrect in this assumption

We need to solve this by requiring all repurchases to be with post tax money.

[+] MarkMc|6 years ago|reply
Incredible that Google has been able to sustain almost 20% revenue growth for so long - much longer than most people expected.

For the past 6 or 7 years people have been predicting that Google's growth would soon slow because:

(a) The number of ads on a search result page had reached saturation point

(b) The percentage of people using the internet in rich countries had reached saturation point

Although real, these effects have proved to be outweighed by other, less limited factors of growth; in particular Google's ability improve the quality of match between advertiser and user. Even now I think there is significant room for Google to improve this matching - eg. when I put an iPad Pro in my online shopping basket at apple.com but don't buy it, why don't I then see iPad ads on YouTube? When I give Tesla $1,000 to reserve but not buy a Model 3, why don't I then see Model 3 ads reading The New York Times? Apple and Tesla are leaving money on the table, and when they wake up Google will make even more money.

[+] bduerst|6 years ago|reply
With your example, why would Tesla advertise to you after you have already converted on a purchase?

In fact, Tesla can use your email address on a negative audience list when advertising on display networks that hit publishers like NYT. I wouldn't be surprised if Tesla was doing this to optimize their ad spend.

For purchases where you are retargeted, that's because when you buy something, you're a magnitude more likely to purchase it again (i.e. as a gift, have a backup/travel one, etc.). Goods like automobiles are an exception here, unless you're in the business of buying multiple cars in the same month.

[+] mykowebhn|6 years ago|reply
I find it interesting that income more than tripled compared to the previous year's quarter, but their effective tax rate dropped from 24 percent to 18.
[+] tsunamifury|6 years ago|reply
Why is that interesting? Corp tax rates are flat, not progressive and there was a significant change last year.
[+] adventured|6 years ago|reply
Quarterly income tax rates are particularly not very interesting, they're prone to all sorts of blips.

Their 2018 income tax rate was 11% for the year. $4.1b in income taxes and $34.9b in pre-tax income.

In 2016 it was 19%. In 2015 it was 16.8%. In 2014 it was 21%.

[+] ttlei|6 years ago|reply
Thanks to trump's tax cut.
[+] siliconviking|6 years ago|reply
You need to adjust for the $5B EU fine from last year.
[+] samfisher83|6 years ago|reply
Its kind of funny how they just added a European Commission fines row on their income statement.
[+] avocado4|6 years ago|reply
I can't help but think that EU situation has helped Google. A flood of new regulation just keeps entrenching them by killing off any potential upstarts that could compete in Europe.
[+] idlewords|6 years ago|reply
That's comedy gold. Thanks for pointing that out!
[+] dvduval|6 years ago|reply
Paid Click revenue up, revenue per click down. Does this indicate we are seeing more ads? More quantity, less quality? Hmmm...
[+] adamt|6 years ago|reply
There's many factors at play here, but note that the majority of Internet subscriber growth is in developing countries.

As the spending power of the average Internet user decreases, then CPC/CPM naturally falls with it.

[+] bduerst|6 years ago|reply
It means more clicks. If CTR is constant, then it means more impressions (i.e. seeing more ads), or it could mean that ad targeting/serving is getting more intelligent. Probably both.
[+] dragosmocrii|6 years ago|reply
Youtube now shows two ads one after another...
[+] HugThem|6 years ago|reply
Is that $5B fine deductable from taxes?
[+] formercoder|6 years ago|reply
It's on the income statement. So, generally, yes.
[+] criddell|6 years ago|reply
That would make a $500 million dollar difference so in the end, it doesn't really matter.
[+] person_of_color|6 years ago|reply
One day SWE3's are going to be taking home 7 figs in their first year.
[+] plg|6 years ago|reply
What proportion of their revenues comes from ads?
[+] shmerl|6 years ago|reply
Do they publish Google Fiber results?
[+] nkg|6 years ago|reply
Here is the most interesting sentence: "Prior period results excluding the effect of the European Commission (EC) fine of $5.1 billion have been included to facilitate comparison to current quarter performance".
[+] hestefisk|6 years ago|reply
That’s called a pro forma P&L and perfectly reasonable.
[+] joncrane|6 years ago|reply
How is that interesting? Seems considerate to the reader.
[+] ocdtrekkie|6 years ago|reply
Honestly, the trippiest thing to me, is that European Commission fines being marked as an ordinary expense line (and likely one that will be used more in the future), they really are making it clear that violating the law and paying the fines for doing so is really just part of ordinary business to them. And obviously, the fines clearly aren't punitive enough to encourage them to revise this behavior.
[+] jpm_sd|6 years ago|reply
Other Bets operating loss: ($989) [million]

Almost a Billion dollars per quarter!? Put them out of shareholders' misery, already!