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Google Spent S7.4 Billion in Q4 2018 to Acquire Traffic, to Put Strain on Parent Alphabet Inc.'s Earnings

In total, Google had to pay as much as $7.45 billion to acquire traffic during the quarter.

Updated:February 5, 2019, 7:20 PM IST
Google’s parent company Alphabet Inc reported solid Q4 2018 earnings and beat the Wall Street estimates for revenue and profit. However, the company’s stocks still slid, as investors are perhaps a bit worried about the spending in the same quarter. As per the numbers shared by Alphabet Inc., they repprtedly spent $31.07 billion in total fourth-quarter costs and expenses, which is up 26 percent from the same period last year. Capital expenditures also rose 64 percent compared to the same period last year, and was calculated at $7.08 billion.

Some of that spending was driven by Google. In Q4 2018, the advertising revenue reached $32.6 billion, which is a 20% increase year-on-year. Incidentally, Google had reported the same growth rate in the same quarter in 2017, which shows that growth could have slowed down in many ways.

Google also had to spend more to attract traffic, particularly to the search engine. This includes the deal that allowed Google to become the default search engine on Apple’s iOS devices. In total, Google had to pay as much as $7.45 billion to acquire traffic during the quarter. Incidentally, this was up 13% compared with Q3 2018, and up by 15% over Q4 2017.

Revenue from the cloud business and hardware including the Pixel smartphones and the Home smart speakers rose 31% to $6.49 billion.

Google's revenue for the quarter was $39.1 billion, up 22% from the $32.2 billion reported in the corresponding quarter the year before. At the same time, the operating income increased 13% and is now at $9.7 billion, compared with $8.6 billion in the same period in 2017.

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