FELL LIST WITH A LITTLE MORE ON
THIS.
REPORTER: MELISSA, A MISS FOR
ALPHABET, PARENT OF GOOGLE.
ACTUALLY EPS, $9.50.
REVENUES COMING IN
36.34 BILLION.
YOU CAN SEE THAT ALPHABET FELL
SHORT, NOT JUST ON THE EPS BUT
ALSO ON THE REVENUE SIDE.
REALLY INTERESTING TO NOTE THE
LAST EIGHT QUARTERS ALPHABET
BEAT EPS ESTIMATES SIX TIMES AND
REVENUE ESTIMATES SEVEN TIMES.
WALL STREET WAS EXPECTING A LOT
TODAY.
THE STOCK CLOSED AT A RECORD.
IT IS TRADING DOWN IN THE
AFTER-HOURS.
MAIN METRICS TO WATCH HERE, WHAT
THE COMPANY SAYS ABOUT YOUTUBE
WHAT IT SAYS ABOUT DIGITAL
ADVERTISING, TRAFFIC ACQUISITION
COSTS AND ALSO ITS CLOUD
COMPUTING BUSINESS.
REMEMBER AMAZON HAD A BLOWOUT
BEAT.
SO THAT IS GOING TO BE ONE OF
THE METRICS WE COMPARE IT TO ON
THE SERVICES SIDE, APPLE WILL
REPORT TOMORROW.
HOW ALPHABET MEASURES UP TO THE
COMPANIES IN THE SAME SPACE,
REALLY, REALLY IMPORTANT ON
WALL STREET, GUYS.
CONNELL: WANT TO GO OR
MELISSA --
MELISSA: SHE MENTIONED THE
TRAFFIC ACQUISITION COSTS WE'RE
WANTING TO SEE.
6.68 BILLION.
AS OPERATING MARGIN AT 18%.
GO AHEAD, CONNELL.
CONNELL: ADAM, THE TRAFFIC OR
TAC, TRAFFIC ACQUISITION COSTS
WERE SUPPOSED TO BE UP 15 1/2%
TO 7.26 BILLION AS MELISSA SAYS
THE NUMBER IS BELOW THAT AT
6.6 BILLION.
STOCK ALMOST 3% LOWER.
WHAT DO YOU MAKE OF NUMBER THAT
PEOPLE LOOK AT HOW THEY'RE
DRIVING THEIR TRAFFIC AS A VERY
IMPORTANT METRIC.
>> I WANT TO MAKE SURE THAT I
HEARD YOU CORRECTLY.
SPENDING MORE THAN THE STREET
EXPECTED OR LESS THAN THE STREET
EXPECTED.
CONNELL: LESS THAN THE STREET
EXPECTED.
THEY EXPECTED THEM TO SPEND
7.26 BILLION IS MY
UNDERSTANDING.
>> SO THE NUMBERS CRUNCHERS WILL
HAVE TO NUMBER ONE CRUNCH THAT,
NUMBER TWO, ASK THE COMPANY WHY
ARE YOU SPENDING LESS THAN WE
EXPECTED TO, AND DOES THAT DRIVE
THE LOWER REVENUE FIGURE YOU
ENDED UP WITH?
WALL STREET EXPECTED MORE FROM
GOOGLE ALPHABET.
BUT WE'LL HAVE TO SEE.
ALL THE CONVERSATION, ALL THE
ANALYSIS HOW MUCH MORE.
HOW MUCH THIS MATTERS.
CONNELL: IT IS TOUGH, JONAS, SO
BIG, OBVIOUSLY ALPHA BET.
IT IS TOUGH WHEN YOU WANT TO
SAY, JACKIE BROUGHT UP YOUTUBE,
IT'S A BIG PART OF THEIR
BUSINESS.
THEY DON'T BREAK IT OUT.
IT IS TOUGH FOR US TO KNOW.
>> IT'S A BLACK BOX.
WE KNOW WHAT THEY SPEND ON SOME
THINGS BUT WE DON'T KNOW -- THE
PROBLEM WITH THIS COMPANY,
EVERYTHING OUTSIDE OF WHAT THEY
DISCLOSE IN ADVERTISE SOMETHING
KIND OF SECRETIVE OR LOY MARGIN
OR NEGATIVE MARGIN BUSINESS.
OR NEGATIVE MARGIN.
THEY ARE REALLY ROLLING THIS
ADVERTISING MODEL, THEY'RE
BEATING THAT HORSE.
WITH REGULATORY CRACKDOWN OR
JUST COMPETITION AS I WAS SAYING
BEFORE, PEOPLE SHOP ON AMAZON
NOW, THAT IS AD PLACE TO RUN THE
ADS AS OPPOSED TO SEARCH.
THEY TURNED SEARCH INTO
SHOPPING.
WHY NO-GO ON AMAZON TO DO
SHOPPING THERE.
I THINK THEY WILL LOSE STUFF.
WHEN YOU TALK ABOUT ACQUISITION
COSTS?
THEY ACTUALLY PAY COMPANIES FOR
TRAFFIC.
>> AND OTHERS.
>> MAYBE THEY'RE NOT GETTING AS
MUCH TRAFFIC.
PART OF ANOTHER PROBLEM THERE IS
A WHOLE MARKETING BUBBLE GOES ON
WHERE ALL THESE UNICORNS ARE
SPENDING MONEY DRIVING TRAFFIC
FROM OTHER ONES.
IF YOU LOOK AT LOW MARGINS,
RECENT IPOs, MARGINS AND
ACQUISITION COSTS SO HIGH.
THEY SPEND IT ON EACH OTHER.
MELISSA: PAID CLICKS ON GOOGLE
PROPERTIES UP 39%.
MEANWHILE COST PER CLICK ON
GOOGLE PROPERTIES DOWN 19%.
CONNELL.
>> THAT SHOULD BE, THAT SHOULD
BE --
CONNELL: ONE SECOND.
I WANT TO TAKE ONE SECOND
BECAUSE JONAS BROUGHT IT UP, TO
EXPLAIN OR KIND OF READ THE
DEFINITION OF TRAFFIC
ACQUISITION COSTS ARE.
THE FEES THAT THE COMPANY IS
PAYING.
ALPHABET IS PAYING TO PARTNER
SITES, RIGHT?
SO THE ADS CAN BE DISPLAYED.
GOOGLE ADS CAN BE DISPLAYED OR
DIRECTING TRAFFIC TO THE SITE.
NOT JUST APPLE, BUT PAID TO ALL
OF THE PARTNERS.
THE IDEA THAT SPENDING AS ADAM
BROUGHT UP, SPENDING LESS THAN
WALL STREET THOUGHT ON THIS.
CONTINUE YOUR THOUGHT ON WHAT
MELISSA SAID, ADAM.
>> THE TWO METRICS MELISSA CITED
SHOULD BE GOOD NEWS FOR THEM,
SHOULD SUGGEST THEY'RE BEING
MORE EFFICIENT.
I WANT TO SAY JACKIE BROUGHT UP
A VERY GOOD POINT WE'RE NOW
FIRST TIME COMPARING GOOGLE TO
AMAZON.
AMAZON HAS THIS GIANT WEB
SERVICES BUSINESS, GOOGLE
DOESN'T AND THEY WANT ONE.
IT IS TOO SOON TO SAY IF THEY'RE
DOING WELL ENOUGH TO JUSTIFY THE
INVESTMENT BUT WE NOW KNOW THIS
IS VERY BIG BUSINESS THEY MISSED
OUT ON.
INVESTORS WANT TO KNOW ARE YOU
MAKING PROGRESS OR NOT?
THEY JUST HAVE A NEW HEAD OF
THAT BUSINESS.
THERE IS PROBABLY NO EVIDENCE
YET THAT THEY'RE CATCHING UP BUT
INVESTORS WANT TO KNOW IF THEY
HAVE A SHOT.
CONNELL: AMAZON IS TRYING TO
CATCH UP OR SO TO SPEAK OR PLAY,
ADAM, THEY WERE TALKING ABOUT
THE ADVERTISING BUSINESS WHERE
GOOGLE OWNS IT.
THE TWO COMPANIES FOR REAL ARE
REALLY RIVALS.
>> AMAZON IS THE MORE DANGEROUS
RIVAL.
IT WAS ME SET UP TO BE NOT EVIL.
THAT COMPANY CAME FROM PRIVATE
COMPANY.
>> A GOOD POINT.
>> ALEXA IS BEATING AREAS.
A LOT OF AREAS GOOGLE IS LOSING
BECAUSE THEY'RE NOT AS
AGGRESSIVE AS AMAZON.
THIS WHOLE 20-DOLLAR COST PER
CLICK THING, RELATED TO A STRONG
ECONOMY, PEOPLE PAYING FOR EACH
OTHER'S ADS.
IT SHOULD FALL RAPIDLY IN
SLIGHTLY WEAK ECONOMY.
I DON'T THINK INVESTORS ARE
AWARE HOW HIGH THE NUMBER IS AND
THE ADVERTISING MARKET THAT
COULD BE A IN A --
MELISSA: ADJUSTED EPS OF $11.90.
THAT IS ADJUSTED 11.90.
WE HAD 9.50 BEFORE GO AHEAD.
CONNELL: THE STOCK IF ANYTHING
IS SELLING OFF MORE HERE, ADAM.
TRAFFIC ACQUISITION COSTS AND
REVENUE BEING LIGHT.
SO IT IS CLEAR PEOPLE WANT MORE
FROM THE COMPANY.
>> I THINK JONAS MAKES A VERY
GOOD POINT THAT THE REASON WHY
WE'RE SPENDING ALL THIS TIME
TALKING ABOUT ALPHABET AT THE
TOP OF THE HOUR IT HAS BECOME A
PROXY FOR NOT JUST THE U.S.
ECONOMY BUT FOR THE GLOBAL
ECONOMY.
CONNELL: WHAT DOES THIS TELL US
THEN?
>> WELL, I MEAN, I'VE BEEN, I'VE
BEEN AROUND LONG ENOUGH TO BE
WRONG WITH INSTANT ANALYSIS BUT
IF THE REVENUE FIGURE IS LIGHT
IT SUGGESTS THAT THE REVENUE
FIGURE IS LIGHT AROUND THE
WORLD.
THAT IS WHAT WE'RE GOING TO WANT
TO KNOW ABOUT.
MELISSA: YOU'RE SO RIGHT ABOUT
INSTANT ANALYSIS.
[LAUGHTER].
THAT IS TRUE.
CONNELL: WE'VE ALL BEEN AROUND
LONG ENOUGH.
JONAS, ONE LAST THOUGHT.
WE'LL WRAP IT UP.
HOW LONG HAVE YOU BEEN AROUND TO
BE WRONG?
>> THROUGH '99.
THAT IS ALL YOU NEED TO REMEMBER
HOW MUCH ADVERTISING RATES FELL
80, 90% IN THE LAST BIG
RECESSION.
WE'LL SEE RATES ARE COMING DOWN.
THE AMOUNT OF PROFIT YOU CAN
MAKE IN ADVERTISE SOMETHING
ALREADY STARTING TO TO POSSIBLY
EVEN NEGATIVE IN SOME AREAS.
IN ADDITION ALL THE COMPETITION
FROM AMAZON AND THEIR