Alphabet Inc, the holding company of Google, posted net profit of $4.2 billion for the quarter ended March 31, 2016 (Q1 2016), a rise of 19.68% from $3.52 billion in the same quarter last year. The company also reported revenues of $20.26 billion, an increase of 17.38% from $17.26 billion in the same period last year.
Alphabet’s Other Bets division, which includes its fiber, home automation, life sciences and moon shot research business, reported revenues of $166 million up 107% from $80 million from the same period last year.
Alphabet’s net profit was hit due to a strong dollar. “We realized a negative currency impact on our revenues year-over-year of $762 million or $593 million after the benefit of our hedging program,” Ruth Porat, chief financial officer said.
Here are few takeaways from Alphabet’s earnings and call with analysts:
Traffic Acquisition Costs (TAC) higher due to mobile and programmatic
Traffic Acquisition Costs (TAC), payments to other websites, stood at $3.8 billion for the quarter. This was up 13.24% from $3.35 billion in the same quarter last year. This represented 21% of Google’s ad revenues. “The increase in both Sites TAC and Network TAC as a percentage of revenue reflects the fact that our strongest growth areas, namely mobile and programmatic, carry higher TAC,” Porat told analysts in a call.
Porat said spending on traffic acquisition is expected to keep rising as the shift to mobile continues.
Investment in YouTube originals
Google CEO Sundar Pichai said that the company is investing in YouTube Originals which would be on the paid service YouTube Red. “This year, we are on track to release 15 to 20 original series or films coming up,” Pichai said. YouTube so far has released six original series for YouTube Red.
Porat added that other cost of revenues for Google was $3.6 billion, up 27% year-over-year. The primary costs were content acquisition costs for YouTube, operating data centres and hardware costs for the launch of Nexus, Chromecast and Pixel devices.
Chrome mobile browser hits 1 billion active users
Pichai also said that the Chrome browser for mobile hit 1 billion active users and that the company is pushing its Accelerated Mobile Pages (AMP) programme. Last quarter, Google reported that its email service Gmail has hit 1 billion active users. Other Google services such as Search, Android, Maps, YouTube, and Google Play which have more than 1 billion monthly active users.
Pichai also added that sites on AMP load four times faster and use 10 times less data than traditional pages. “We recently made it easy to find AMP in relevant Mobile Search and Google News results, giving users a lightning-fast reading experience for top stories. And there are great advertising opportunities for publishers in these new fast pages,” he added.
Th Other Bets division saw a 108% rise in revenues to $166 million. However, the loss widened to $802 million compared to $633 million in the same quarter last year. “Reported revenue for Other Bets was primarily generated by Nest, Verily and Fiber,” Porat said.
Other Bets capital expenditure was $280 million in Q1, primarily reflecting ongoing investment in the Fiber business.
– Net profit was stood at $4.2 billion a rise of 19.68% from $3.52 billion in the same quarter last year.
– Alphabet reported revenues of $20.26 billion, an increase of 17.38% from $17.26 billion in the same period last year.
– Google as segment reported revenues of $20.09 billion, an increase of 18% from $17.18 billion from the same quarter last year.
– Google’s websites reported revenues of $14.33 billion, an increase of 20.11% from $11.93 billion in the same period last year.
– Advertising revenue stood at $18.02 billion, increasing 16.18% from $15.51 billion in the same period last year.