Alphabet’s stock was down yesterday:
3 things this means for Google and for your brand
Alphabet, Google’s parent company, shares were down by about 3% at close yesterday, despite posting better than expected second quarter revenues of £20bn (representing a 21% jump). So why did the share price fall, what are the portends for Google, and what can we learn as brands? Here are my top three insights…
Prediction #1: Anti-trust and data legislation is an issue which will continue to dog Google; we all need to get ready
The EU commission recently fined Google a record £2.1 billion for abusing its dominance as a search engine to boost its shopping comparison service. Some say its drive for profit, innovation and power has run into a regulatory wall in Europe and a tenacious challenger is the shape of Margarethe Vestager.
“Google’s ability to shrug off a record fine in a single quarter underscores the problem with trying to use fines to rein in tech giants like Google. It would take more than 35 additional fines of the same size to deplete Google’s $94.7 billion cash and securities hoard…But there’s a difference between being able to afford to pay the fines and keeping shareholders happy: If Google were hit with multiple fines of last month’s magnitude, investors would surely revolt”
(Klint Finley, Wired)
My prediction: with two further EU investigations into Google underway (Android and AdSense) and more legislation looming, I believe analysts will continue to look at future regulatory impact on Google’s business model and the way that they demonstrate they are managing this risk will be key.
My advice for brands: with General Data Protection Regulation (GDPR) coming in 2018, companies falling foul of the new laws will face fines of up to 4% of their global turnover. It’s vital to understand the legislation’s impact, get a handle on that risk and get your plans in place for compliance now. Google’s legal director, Keith Enright, says they have more work to do under GDPR and that they are developing privacy programs focussed on the user and transparency. It might not be sexy, but ignore compliance and privacy at your peril, and be transparent and user-focussed.
“I think the GDPR is evolutionary…one area everyone is going to have work to do is bringing our privacy programmes to this next level of security that’s not only about protecting the privacy of the data but also becoming more robust in our ability to demonstrate we’re doing so.” Keith Enright, legal director, privacy, Google.
Prediction #2: I don’t care what industry you are in: Mobile is the device to start from today. Mobile will become an even more important source of ad revenue for Alphabet
Mobile is eating the world and should anchor your customer experiences (looking to the future, Voice to Cloud and other devices will eventually change things, but more on this later). In their results, Alphabet warned their expenses would remain high as more searches shift to mobile devices, and its fastest-growing segments — mobile and YouTube advertising — are less lucrative than desktop advertising. This is likely to have some analysts asking questions.
“The results are reflecting two basic trends: an ongoing shift to mobile and an increasing amount of their revenue coming from YouTube,” Mark Mahaney, analyst at RBC Capital Markets.
My prediction and advice for brands: mobile as a mega trend remains and the shift continues. If your website is not mobile first, it should be; even if you still see a high percentage of desk top users, a mobile first design forces simplicity which I argue makes for a better and more usable design. Build it and they will come, and keep coming.
Prediction #3: Video will remain at the heart of brand content marketing; this space is going to get even more competitive for Alphabet and its rivals
Analysts will note how dependant Alphabet is on search advertising and while revenue is up, Google’s profit per click on ads was down by about 23% from this time last year, so to diversify they are investing beyond search. YouTube, for example, is competing in two increasingly crowded markets: live streaming TV and premium online video.
My prediction: video (from long form premium to live streaming) will continue to dominate content, with this space becoming ever more crowded. YouTube Red, Google’s paid content play, competes with Netflix and Amazon Prime for example and I expect the competition to intensify and more players enter the market. The winners will be those who can produce stand out content and stories, which anticipate what the market wants; Netflix are doing a fantastic job on these fronts so Google (and Facebook) will have to work incredibly hard to compete here.
My advice for brands: you simply can’t afford to ignore video as part of your content plans; build the capability or outsource to trusted partners for quality long form shoots as well as quick to market live streaming. Curate or create fresh content that inspires, is original, authentic and relevant for your audience.
Google have a phenomenally successful and enviable business model, but like many corporations they are up against intense competition, a fickle market and a complex global legislative environment; given their record for innovation and agility though, I am pretty confident they’ll keep up. Will your brand?
