The fact that Google relies on ads as potential sales growth is hardly a secret. Now though, it appears that the company is paying more and more on expanding its advertising sector and some Alphabet investors are concerned.
Alphabet reported sales of about $20.92 billion, after minus partner payouts. While this figure kind of met analysts’ estimations, it fell below the more optimistic estimates. The record antitrust fine from the EU also took its toll.
What got investors fretting was a strange little acronym – TAC. What’s that? We’re so happy you asked. TAC stands for ‘traffic acquisition costs’ and it accounted for about 22% of the revenue generated by the main Google division. Last year’s TAC was 21%. This suggest that Google is paying more to partners, which could nibble at its revenue.
Why is TAC rising? Well, the main source for Google growth comes from mobile search ads, YouTube and so-called programmatic campaigns. These types of ads are pricier than the regular Google web ads because the company needs to share more of the profits.
According to Bloomberg, Alphabet shares decreased by as much as 3.5% in after-hour trading.
That said, Google shares are not doing so badly so far in 2017, rising by over 26% since the beginning of the year.
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