Alphabet Reports Sagging Profits, Dampened By EU Fine

Amidst Alphabet's stellar revenue results, a drop in second-quarter profits as a result of the $2.74 billion fine imposed by the European antitrust regulators seemed to put a damper on the uptick. The company reported a 27.7% drop in quarterly profit. 

The EC announced a decision in June to fine Google, saying its Shopping search results and ads infringed European competition law. The fine is included in “accrued expense and other current liabilities” on Alphabet's Consolidated Balance Sheet.

Google's parent company reported Monday that second-quarter 2017 revenue rose 21% year-over-year, reaching $26 billion. The company beat estimates by $410 million.

Google’s other bets revenue -- which includes hardware, software and cloud services -- generated about $3 billion in the first quarter, compared with $2 billion a year ago.

Aggregated paid clicks rose 52% in second-quarter 2017, compared with the year-ago quarter. Paid clicks on Google properties rose 61%, and paid clicks on Google network member properties rose 9%, respectively.

The aggregate cost per click for the quarter fell 23%, compared with a year ago. CPCs fell on Google properties by 26% and on network member properties by 11%, respectively. CPCs on network member properties in Q2 rose 5%, compared with the prior quarter.

Traffic acquisition costs came in at $3 billion.

Just prior to releasing earnings, Alphabet announced the appointment of Google CEO Sundar Pichai to its board.

Google, which pulls in about 90% of Alphabet's earnings, should generate about$73.75 billion in digital ad revenue worldwide in 2017 -- up 17.8% over last year, per eMarketer. The earnings will contribute about 33% of the total worldwide digital ad market, which this year is worth $223.74 billion.

Per eMarketer, Google will take about $61.80 billion in search ad revenue in 2017 -- or 61.6% of the search ad market worldwide -- but come in second to Facebook in display ad revenue. Google will generate $11.95 billion in display ad revenue worldwide this year, or 11.2% of total display spending. 

Breaking out mobile and YouTube net revenue, eMarketer estimates nearly $50 billion in mobile worldwide, and $7 billion in net ad revenue worldwide for YouTube. 

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