Tag Archives: orcl

Google Mobile Search A Moneymaker, But Ad-Cost Hurdles Remain

Google is making more money from mobile search, as Yahoo ( YHOO ) and Microsoft ( MSFT ) ad platforms falter. But it’s not all gravy, as parent Alphabet ’s ( GOOGL ) Q1 earnings attest. The good news is that clicks on Google’s mobile search ads are rising fast. Mobile rose from 44% of all Google clicks in Q2 2015 to 57% in Q1 2016, says digital marketing firm Merkle. But mobile ad clicks continue to pay less than desktop ad clicks because consumers buy less often on smartphones. Google’s average cost of a click on one of its ads fell 9% in Q1 vs. Q1 2015. Lower-priced mobile clicks were a big factor. Google aims to drive mobile cost-per-clicks (CPCs) higher with new ad technology. There’s also the matter of traffic acquisition costs (TAC). That’s where Apple ( AAPL ) may or may not come in. Google’s overall TAC — what it pays partner websites, both desktop and mobile, in fees for carrying its ads — rose 13% in Q1, to $3.8 billion. Higher TAC shrunk Alphabet’s earnings, which missed Wall Street estimates. More alarming to analysts was that TAC paid to “distribution partners” jumped 33% to $1.22 billion. Google’s search engine is the default on most mobile devices, and it’s the default search engine for Apple’s Safari browser. There’s been speculation over whether Apple and Google will renew the Safari contract. To some analysts, the 33% jump in “distribution partner” TAC was a red flag. On the company’s Q1 earnings call last month, Alphabet CFO Ruth Porat attributed the TAC hike to general mobile trends and new advertising technology — and not to any one major contract renewal. Mobile TAC is higher than desktop TAC, Porat said. But analysts wonder. “I certainly can’t rule out a higher Safari TAC rate tied to a renewal,” Mark Ballard, senior research director at Merkle, told IBD. “There are so many moving pieces here, and Google and Apple have been very tight-lipped about their dealings over the years. “It very well could be a combination of higher Safari traffic share and TAC rate. (But) Google has made some moves in the past few quarters to significantly ramp up the monetization of its mobile results. This additional revenue may be coming at a higher TAC.” Google Ad Contracts ‘Have Potentially Changed’ Ballard notes that Google in late 2015 added a third ad atop mobile-search results. Growing use of product listing ads (PLAs) in mobile phone search results may be another factor. Google’s Q2 earnings in July could provide more evidence either way. “We think the terms of (Google’s) contracts have potentially changed and could be another driving factor of the growing TAC,” Evan Wilson, a Pacific Crest analyst, said in a research report. “At this point, we’ve modeled (TAC) increases to be gradual and not a significant new headwind. “We’re going to keep a close eye on news of a potential new Apple deal, as this would be a primary suspect to further fuel this dynamic.” The big picture, though, is that if TAC rises sharply, it would be a problem for Google’s profitability, whether or not Apple is directly involved. At RBC Capital, analyst Mark Mahaney wrote in a research note: “We view the Q1 TAC trends as one of the clear negatives of the quarter. That 8.5% TAC rate for Google Sites is a material step up. We wonder whether a renegotiated Apple contract had anything to do with this. (But) we are modeling modest growth in TAC going forward.” Documents released in January in the ongoing Google- Oracle ( ORCL ) court battle revealed that Google paid Apple $1 billion in 2014 to make its search engine No. 1 on Safari. TAC payments, though, are separate, analysts say. Goldman Sachs, in a 2015 research report, estimated that 75% of Google’s mobile search revenue came from iOS users (iPhone and tablet), and half of that was related to Safari. Goldman Sachs estimated that 65% of ad revenue went to Apple, while Google kept 35%.

Oracle Expands Cloud-Based Utilities Push With Opower Acquisition

Oracle ( ORCL ) will pay $532 million to acquire Opower ( OPWR, ) a cloud-based software provider that says it’s used by 100 utility companies for meter reading services for homes and businesses. Opower says its Big Data platform stores and analyzes more than 600 billion meter reads from 60 million utility end-customers, enabling utilities to meet regulatory requirements, decrease the cost to serve, and improve customer satisfaction. Opower became a publicly traded company two years ago and reported revenue of $148.7 million in 2015, up 16%. Oracle will pay $10.30 per share in cash for Opower, which will be integrated into the Utilities Global Business Unit of Oracle. According to an Opower news release, it is a leading provider of “mission-critical cloud services to utilities.” The price represents a 30% premium to Opower’s Friday closing price of 7.90. Opower stock hasn’t traded above 10.30 since early this year. Its shares were up 31% in early trading in the stock market today , near 10.30. Oracle stock was up a fraction, near 40. The acquisition follows the $663 million deal last week that Oracle reached to acquire Textura ( TXTR ), a leading provider of construction contracts and payment management cloud services. Oracle will pay $26 per share in cash to acquire Textura, paying a 31% premium on that company’s stock.

Google’s Pichai Sees ‘Move From Mobile-First To An AI-First World’

Apple ( AAPL ), Microsoft ( MSFT ) and other rivals of Alphabet ( GOOGL )-owned Google had better raise their game in artificial intelligence. While Apple, Facebook ( FB ) and Amazon.com ( AMZN ) have AI research projects underway, the field is one where Google aims to set itself apart from rivals. So said Sundar Pichai, Google’s chief executive, Thursday in an open letter. Google founders  Larry Page and Sergey Brin normally write the founder’s letter , in the tradition of Berkshire Hathaway ’s ( BRKA ) Warren Buffett. But Pichai wrote this year’s note. Pichai says that AI is key not only to its core search business and mobile computing, but also to Google’s push into the enterprise (corporate) market and cloud computing. “A key driver behind all of this work has been our long-term investment in machine learning and AI,” Pichai wrote. Google has pushed Android software-based mobile phones into a global power vs. Apple’s iPhone. (The Oracle ( ORCL ) vs. Google copyright battle over the Android OS is slated to resume with a second trial on May 9.) Pichai says that Google’s AI will be a difference maker. “Looking to the future, the next big step will be for the very concept of the ‘device’ to fade away. Over time, the computer itself — whatever its form factor — will be an intelligent assistant helping you through your day. We will move from mobile-first to an AI-first world,” he said. While Apple and Google have dominated in the world of mobile apps, there could be competition down the road. Facebook recently introduced “chatbots,” while Microsoft ( MSFT ) launched its “Bot Framework” software tools for developers. Both rely on AI. Google also aims to capitalize on AI in the enterprise market vs. Microsoft and others. “Google started in the cloud and has been investing in infrastructure, data management, analytics and AI from the very beginning. We now have a broad and growing set of enterprise offerings: Google Cloud Platform (GCP), Google Apps, Chromebooks, Android, image recognition, speech translation, maps, machine learning for customers’ proprietary data sets and more,” Pichai said. “As we look to our long-term investments in our productivity tools supported by our machine learning and artificial intelligence efforts, we see huge opportunities to dramatically improve how people work. Your phone should proactively bring up the right documents, schedule and map your meetings, let people know if you are late, suggest responses to messages, handle your payments and expenses, etc.”