Heard on the Street: Alphabet has lagged behind other major tech stocks on worries about its dominance of its advertising platform
Parent company Alphabet has been the worst-performing stock so far this year among S&P 500 tech companies valued at more than $100 billion. Its year-to-date gain of 13% matches that of the broad index and is less than half the gains mounted by rival Facebook, despite the latter’s continued controversies with content, user privacy and executive reshuffling. Alphabet is now valued a little over $800 billion; market leaders Microsoft and Apple are close to $900 billion.
Ironically, much of the recent weakness relates to the continued dominance of Google’s search ad business, which is projected to generate about $137 billion in revenue this year. Earlier this month, the company was hit with a $1.7 billion fine by European regulators over past business practices involving ads displayed on third-party websites.
That was just the latest fine levied by the EU, bringing Google’s total damage in that jurisdiction to nearly $7.7 billion. It came just two weeks after Democratic presidential hopeful Elizabeth Warren issued a call for the breakup of several big tech companies. In her proposal, she singled out several of Google’s past acquisitions as deals to unwind, including the 2007 purchase of DoubleClick that is now deeply entwined in its massive ad business.
And last on March 22, trade publication Adweek reported that Google was evaluating several privacy enhancing changes to its ad business, including possible restrictions on how advertisers can track and target users through its Chrome browser. While that ultimately could affect some of the company’s advertising business, it could hurt others in the ecosystem even more.
The logo of Google is pictured during the Viva Tech startup and technology summit in Paris in May 2018. Photo: charles platiau/Reuters Apple made similar changes to its Safari browser in 2017, helping to burnish the company’s reputation for privacy. But Google is an entirely different beast, as it powers nearly 93% of the world’s internet searches, with Chrome accounting for nearly two-thirds of the browser market, according to Statcounter.
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