Sales and Profits Surge at Google

Business at Google is very good despite worries over data privacy. Google’s parent company, Alphabet, posted a $9.4 billion profit for the first quarter of 2018, which was up from last year’s $5.4 billion for the same period.

The bottom line at the company was helped by continued strength of ad sales. Google’s sales during the quarter increased by 26% to end the quarter at $31.1 billion, while the ad business alone represented over $26.6 billion of the total.

Alphabet benefited as well from an effective tax rate that was only 11% compared to last year’s 20% due to the recent tax reform.

Google was the first major tech company reporting its quarterly earnings since news of the scandal involving Cambridge Analytica.

While that huge problem was focused on Facebook, it upended stocks for companies such as Twitter and Google, which make money primarily through collecting personal data and using the same to sell ads that are targeted to that same personal data.

The story about Cambridge Analytica broke during the middle of March, which makes it very unlikely it would have any material effect on the financial results of tech companies during the first quarter.

However, Wall Street continues to be on edge related to possible regulation. Politicians in the U.S. as well as Europe have focused attention on data privacy protection.

A huge question that continues to linger is the possible evolving of a new regulatory landscape that could be on Google’s horizon, said one analyst.

A sweeping new data protections measure, General Data Protection Regulation or GDPR, will take effect throughout the European Union starting late in May. Analysts at Goldman Sachs estimate this bill could cut the ad revenue for Google by up to 2%.

During a conference call Monday with analysts, CEO of Google Sundar Pichai played downed the possible impact the GDPR will have noting that the majority of ads business is search ads, which requires limited information on users.

Pichai said the company was focused on being correct with compliance, noting that Google spent the last 18 months working on complying with the new GDPR.

YouTube, one of the key moneymakers for Google, is struggling with ads that appear with offensive content. Recently it was found that hundreds of brands had their ads run alongside extremist videos.