Public Markets

Morning Report: EC Fine Leaves Alphabet (Almost) Unscathed

Morning Report: The $2.74 billion European Commission fine is a drop in the Alphabet revenue ocean.

Yesterday, Alphabet’s shares dropped after the release of its Q2 revenue report, drawing attention to the $2.74 billion European Commission (EC) fine that weighed on its profit.

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In case you missed Google’s antitrust struggles, here’s a recap: In the past seven years, Google received various charges against allegedly monopolistic tendencies, involving its Android operating system and its ad placement service AdSense. This time around, Google was fined for promoting its shopping service and demoting those of its competitors in its search results.

However, when we look at Alphabet’s 2017 Q2 earnings report (Alphabet is Google’s parent company) the $2.74 billion fine is a drop in the ocean. Though its operating margin dipped about 12 percent when comparing 2016 Q2 and 2017 Q2, the company posted a 21 percent increase in revenue (YoY). (The fine, of course, being a cost, didn’t impact the company’s revenue growth.)

Ruth Porat, Alphabet’s Chief Financial Officer of Alphabet, remains positive about the company’s continuous potential for growth: “With revenues of $26 billion… we’re delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams.”

Alphabet has a diverse number of income channels, properties and advertising revenues being the two main ones. Even though “Other Bets,” from venture capital to anti-aging research, are still running on deficit, their performance have improved over the years. From our Crunchbase News analysis yesterday, though these investments may not amount to immediate profit, they may prove crucial for Alphabet’s future development.

A History of EC Fines

Alphabet is not the first US technology firm to endure such a large fine from the European Commission. The chart below shows a history of EC fines on US tech behemoths.

Alphabet ranks second out of the tech giants charted above in the order of fine amount. The company lags only behind Apple, which was ordered by the commission to pay a huge chunk of back taxes to Ireland in 2016.

We shouldn’t worry too much about Alphabet’s share drop though, as it may only be temporary. If its staple (stable) revenue streams (Google mainly) operate as expected, Alphabet should recover pretty quickly.

From the Crunchbase Daily:

Convoy raises $62M for trucking network

  • Convoy, an on-demand service for connecting shippers and trucking companies, has raised $62 million in a Series B round. Y Combinator led the financing for the two-year-old, Seattle-based startup, with participation from Bill Gates, Mosaic Ventures, Barry Diller and others.

Facebook acquires Source3

  • In an apparent move to bolster anti-piracy tools for content creators, Facebook is acquiring Source3, provider of a platform for recognizing and managing intellectual property in user-generated content. New York-based Source3 previously raised about $4 million in venture funding.

VC funding looks strong, exits weaker

  • The latest venture industry stats show new, big funds, big rounds, and other bullish indicators. But while that side looks healthy, the exit market is lacking, with a tepid IPO market and slow M&A pace. To help catch up on trends, Crunchbase News has aggregated our all of our second quarter reports in one place. In other news, we look at how Alphabet is curtailing losses in its “other bets” projects.

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

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