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|04 February, 2019

Google and Facebook are begging for a watchdog

Concerns about fake news and the wanton commercialization of consumer data have done little to clip their dominance of online advertising.

Figurines are seen in front of the Facebook logo in this illustration taken March 20, 2018.

Figurines are seen in front of the Facebook logo in this illustration taken March 20, 2018.

REUTERS/Dado Ruvic

WASHINGTON/NEW YORK  - Google and Facebook have made their quarterly case for a watchdog. The search engine’s parent, Alphabet, reported soaring sales and profit just days after Facebook’s blowout earnings. Concerns about fake news and the wanton commercialization of consumer data have done little to clip their dominance of online advertising. It’s all the more reason for regulatory oversight.

Alphabet’s revenue rose 22 percent in the fourth quarter of 2018 from the same period the previous year. The company’s digital advertising business continues to go gangbusters. Revenue from that part of the business rose 20 percent year over year, and accounted for over 80 percent of the company’s total revenue.

This mirrors the results at Facebook, where notwithstanding an astonishing amount of public and press ire against the company and CEO Mark Zuckerberg, revenue increased 30 percent in the fourth quarter, to $16.9 billion, and monthly active users increased 9 percent, to 2.3 billion people. Furthermore, both companies continued to throw off astonishing amounts of cash even as they increased spending on futuristic ventures ranging from therapies to defeat aging-related illnesses to virtual reality.

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It’s telling to contrast the replicating, machine-like growth of these firms and their profitability with the increasingly dire public perception. Stories emerge nearly weekly about Google and Facebook’s efforts to strip-mine personal information to sell advertising.

Yet market forces to topple the twin powers seem futile, or at least a long way from succeeding. Consider that fellow FAANG Amazon, which also has a fast-growing ad business, is nowhere near sapping their strength. Canaccord Genuity figures only 1 percent of Google’s search revenue is vulnerable to the competitive risk from Jeff Bezos’ firm. The idea of a startup eclipsing the two giants seems even more far-fetched in light of recent jobs cuts at Vice Media, BuzzFeed and Verizon Media, all of which depend on online ad sales.

Google and Facebook’s domination of search and social media, their profits from internet advertising, the data they have collected, and the infrastructure they have created make it hard to see anything – outside regulation – curbing either company over the next several years. Given their deep wells of consumer information, this also sets them up nicely to rule the next wave of internet things to come.

CONTEXT NEWS

- Alphabet on Feb. 4 reported revenue of $39.3 billion in the fourth quarter of 2018, up 22 percent from the same period a year earlier. The company earned $8.9 billion, up from $6.8 billion a year earlier before adjustment for the impact of the 2017 U.S. Tax Cuts and Jobs Act. At $12.77 a share, earnings exceeded the mean analyst estimate of $10.87 a share, according to I/B/E/S data from Refinitiv.

(Editing by Tom Buerkle and Martin Langfield)

© Reuters News 2019

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