‘Google is at Apple’s mercy’ – the trouble in Alphabet’s earnings

“Yes, the company’s name is Alphabet these days, but it might as well be mud, if you go by what some bears are saying,” Victor Reklaitis reports for MarketWatch. “They are pouncing following the search king’s weaker-than-expected earnings ($9.70 for adjusted EPS vs. forecasts for around $10).”

“The miss contrasts with the beats by Apple and Amazon — and by this morning’s jobs report,” Reklaitis reports. “One longtime worry for investors is that as people switch away from PCs to smartphones, Google has become more dependent on rivals like Apple to serve up its ads. Perhaps such fears have been confirmed, as Alphabet’s traffic acquisition costs, or TAC, came in above forecasts.”

“‘Google is at Apple’s mercy for search on iPhones, and that hurts because search has moved to mobile devices,’ says University of Michigan business school professor Erik Gordon for our call of the day,” Reklaitis reports. “This ‘increases its cost to acquire the revenue,’ Gordon tells the FT, which also flags the CFO’s hints about another TAC attack in the current quarter.”

Read more in the full article here.

MacDailyNews Take: Told ya so, long ago:

Google will rue the day they decided to get greedy by working against Apple instead of with them.MacDailyNews, August 3, 2011

Android is pushed to users who are, in general:

a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar ($100 Gift Cards with Purchase) offers.

Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskate freetards just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle building powders or grease monkey overalls.

Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong.

Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.

iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the Hee Haw demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth.MacDailyNews, November 26, 2012

“All men are created equal.”

Well, not when it comes to users of smartphones and tablets…

The bottom line: Those who settle for Android devices are not equal to iOS users. The fact is that iOS users are worth significantly more than Android settlers to developers, advertisers, third-party accessory makers (speakers, cases, chargers, cables, etc.), vehicle makers, musicians, TV show producers, movie producers, book authors, carriers, retailers, podcasters… The list goes on and on.

The quality of the customer matters. A lot.

Facile “analyses” that look only at market (unit) share, equating one Android settler to one iOS user, make a fatal error by incorrectly equating users of each platform one-to-one.

When it comes to mobile operating systems, all users are simply not equal.SteveJack, MacDailyNews, November 15, 2014

Apple App Store users spent nearly double that of Google Play users in Q417 – January 26, 2018
Apple’s iOS continues to attract content apps first, despite smaller unit share – October 30, 2017
Bernstein: Google to pay Apple $3 billion this year to remain the default search engine on iPhones and iPads – August 14, 2017
Higher income U.S. states use Apple iPhones; lower income states use Samsung Galaxy phones – September 27, 2016
iOS users are worth 10X more than those who settle for Android – July 27, 2016
Apple’s App Store revenue nearly double that of Google’s Android – April 20, 2016
Poor man’s iPhone: Android on the decline – February 26, 2015
Study: iPhone users are smarter and richer than those who settle for Android phones – January 22, 2015
Why Android users can’t have the nicest things – January 5, 2015
iPhone users earn significantly more than those who settle for Android phones – October 8, 2014
Yet more proof that Android is for poor people – June 27, 2014
More proof that Android is for poor people – May 13, 2014
Android users poorer, shorter, unhealthier, less educated, far less charitable than Apple iPhone users – November 13, 2013
IDC data shows two thirds of Android’s 81% smartphone share are cheap junk phones – November 13, 2013
CIRP: Apple iPhone users are younger, richer, and better educated than those who settle for Samsung knockoff phones – August 19, 2013
iPhone users smarter, richer than Android phone users – August 16, 2011
Study: Apple iPhone users richer, younger, more productive than other so-called ‘smartphone’ users – June 12, 2009


  1. I don’t think there is remorse because going alone the path of Android was the best strategic choice, and still is. If they didn’t do Android, someone else would have built a competitor to iOS, most likely MS, and Amazon then would have been paying for traffic on ALL platforms. This ignores the other benefits to them (i.e. mining their customers info) from the Android ecosystem

  2. Alphabet’s traffic acquisition costs, or TAC have risen, while Apple’s Average Selling Price ( ASP ) rose by $100.

    Obviously those two things are not the same, but with a service company, TAC is a crucially important factor and with a manufacturing company ASP is a crucially important factor.

    With Googles TAC increasing, their business becomes less profitable, while Apple’s ASP increase helps to make it more profitable.

    Karma is a female canine.

  3. Google has slightly bad news and Wall Street sends APPL share price down. Apple breaks all sorts of records and Wall Street sends AAPL down. Nothing changes.

    1. December quarter results were stellar, but that’s yesterday’s news. March quarter outlook is pretty poor (compared to expectations), and that’s the future.

      WS invests in the future, not the past.

    1. Amazon does have a search engine but focused primarily on products. Recently however I have noted weird filtering results so they may need to review their search engine code.

  4. I’m willing to bet Alphabet recovers from an earnings miss twice as fast as Apple recovers. Any takers? It’s guaranteed Alphabet’s P/E stays intact while Apple’s P/E rapidly compresses. Big investors will definitely choose Alphabet over Apple for having the most potential growth. Currently, Apple is dead in the water because Wall Street is ONLY interested in Apple increasing iPhone sales. The rest of what Apple is doing doesn’t matter at all.

    1. Wall Street isn’t as stupid as the geniuses on this site pretend. They see very well that Apple relies entirely on iPhones. Other products have been abandoned by Apple’s idiot management. Everyone knows that Apple services are inconsistent, the Mac gets lip service only, and Apples previously world class software has become ugly unintuitive and dumbed down into irrelevance.

      A competent management team would have the Mac and software divisions equally as big and profitable as ios. Ios is and always will be the least personal, most restrictive platform out there. Fine for phones, horrid for creation, multimedia editing, scientific and engineering stuff, etc. Apple is a consumer bauble fashion house first, and that will not hold up over the long term. Enjoy the high ASP while the world economy continues its current caffeine buzz. When the bubble bursts, expensive fashion companies selling overpriced limited stuff implode. Apple needs to diversify and recover the customers who kept the lights on the last time Apple did the elite high priced incompatible go it alone route.

    2. Part of the reason Wall Street might be ignoring everything else Apple is doing is because practically all Apple’s recent efforts end up involving the iPhone. In essence the iPhone IS the only thing to watch because it is the keystone to the vast majority of Apple’s business model.

  5. Which is why Apple needs to eliminate the parasites called Amazon and Google from any default position within the iPhone. Let both actually spent more cold hard cash trying to compete. Wall Street continues to think they are equal to Apple tech wise.

    1. You’re right, Google and Amazon should force Apple to move its iCloud business to Microsoft or IBM, remove all Google Suite and Amazon store Apps, and see where they all end up. /s

      In today’s world Apple is just as dependent on Google and Amazon as the reverse to stay relevant.

      1. Baloney, Apple doesn’t need either one at all, look at Googles current earnings report, no default position on the iPhone and Google would be in a world of hurt. Amazon is low margin retail, they can flip every switch, profit is still going to be low.

        1. Not making Google Search the default doesn’t necessarily mean that iOS users won’t switch to Google Search on their own.

          Being profitable, and being needed are two different things. There would be more businesses hurt, including Apple, if Amazon disappeared tomorrow vs Apple.

          AAPL had to worry about GOOG getting within $31B recently. Now they have to worry about AMZN which cut the gap from over $300B to about to $115B in less than 3 months.

          1. Amazon getting the top spot is going to be fun, because the top spot is usually a company that wildly profitable, watching the business types trying to explain the relative lack of profit on Amazon part will be even more fun.

            1. Definitely, but if Amazon does end up topping Apple they may just chalk it up to the difference in business mentality. “Mature” vs “Constantly in start-up growth”.

              From outside it also looks like their ultimate aims are on different scales. Apple with being the best integrated ecosystem vs Amazon’s becoming THE store for every product imaginable.

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