From my perspective as an inveterate Apple watcher, there are two kinds of truth. Numerical truth. And truth that can be seen, or not seen, but is there anyway (like astronomy). Apple lives in the world of numerical truth. Every quarter, for better or worse, Apple dumps numbers into the waiting arms of investors and critics. What about the other truth?
Spell It Out
There are times when the Mac360 writing staff become critical of Apple for one misdeed or another. We would like to see a little more of a public roadmap, but I get it. Apple is a product driven company and divulging future products is a big no no. Alphabet, the new name for Google and GOOGL, can toss out R&D projects onto Main Street every month because the company doesn’t have much history of making anything except software, which is used to trap users (not customers, mind you), which then have their personal data culled and trafficked to the highest bidder in advertising.
Apple is Apple, though, and we need to get over that fact because it’s unlikely to change anytime soon. What of Alphabet?
Google changed the name of the company to Alphabet and made the search engine giant merely a part of the alphabet of companies it hopes to unleash upon the world, and they did so for a good reason. Google is becoming a sour word, a tarnished franchise forever glued to the negativity growing around online advertising, Alphabet’s only source for substantial revenue and profits.
Alphabet is playful but serious, and smacks of an entire line of revenue generating business units, of which Google is merely one of many. Well, right now it’s just the one, but the idea is good enough to divert the attention of investors who don’t pay much attention to the fact that Alphabet is not only a one-trick pony with plenty of unused letters, but it’s only trick is Google the search engine, and, well, let’s just say there are problems growing in search engine land.
Most of the world’s population has already gone online, and that’s where Google makes its money. Online advertising. And, that’s where Alphabet makes its money because nothing else in Alphabet makes money. Google’s online advertising is the revenue and profit generator. Generator. As in singular. Here’s the problem. Beyond Google, Alphabet has nothing else to account for the love affair with the stock market other than potential products that have yet to see the light of day; products you cannot feel, touch, or use. That may change one day, but that’s the way it’s always been, and changing the company name to Alphabet smacks of a future of building blocks of revenue; but for now, it’s not.
Except for one thing. Nearly everyone online today hates advertising and they’re demanding ever more privacy and security. Alphabet’s Google has plenty of the former– advertising– but the money the company only makes comes from taking users’ privacy and security and that is not likely to change soon despite the public R&D parade. Hidden deep within the innards of Alphabet’s obscure financials you’ll find data that indicates revenue per thousands of ads delivered is going down, profits per thousands of ads delivered is going down, and as much as Alphabet wants us to think Google rules the world of advertising, the company’s online advertising market share is about the same as the iPhone is of smartphones, but with far less profit.
Hello? Investors. Pay attention. Scratch and sniff.
Wait. It gets worse. The single largest chunk of Alphabet’s Google-based mobile advertising revenue and profits come from… insert drum roll here… Apple’s iPhone and iPad. And Apple seems intent upon marginalizing that ad revenue by, 1) ditching its own advertising system in favor of automation, further driving down ad revenue by competition, and, 2) allowing ad blockers to permeate Safari and iOS devices. In other words, Alphabet needs Google and Google needs Apple’s iPhone and iPad customer base. Apple doesn’t need Google at all, and one could argue that the company would be better off with a blanket ban of every product of everything with a Google logo on it.
Recently I pointed out that Apple is something of a House of Cards that seems to have forgotten how to take a risk and disrupt markets with new products. If that’s the case, and I believe it is, the jury is still out but that analysis when applied to Alphabet and Google should tell us that the once high and mighty search engine advertising company needs to Think Different™ soon, because the market will become disenfranchised with the form of truth the company is selling. Alphabet is an empire where the emperor wears no clothes, and that’s becoming an ugly truth in more ways than one.