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Alphabet Roundup: Ad Rebranding, Regulatory, YouTube, More

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In this iteration of the Alphabet roundup, I’m discussing Alphabet’s (GOOGL - Free Report) streamlining and rebranding of its advertising business, YouTube’s new income streams for creators, regulatory hurdles that appear to be mounting all over the world, the new internal communication policy and a novel idea forwarded by MS that it thinks will boost the company’s share of the smart home speaker market. Read on for the details-

Rebranding The Ad Biz

Google says that accessing customers has become a much more complex thing because the platforms have changed so much over the last few years. So it’s simplifying the ad buying process into three main products called Google Ads, Google Marketing Platform and Google Ad Manager.

Google Ads is the new “front door” for all inventory on Google search, its YouTube video service, the Google Play app store and the millions of partner properties. Inside the gate however, there are relatively few changes in terms of fees and services. The AdWords brand had to go because we just aren’t limiting ourselves to text and desktop devices any longer. Smart Campaigns, for small sellers to quickly launch goal-oriented ad campaigns (to boost online or store traffic for example), is also a part of this.

Also, to simplify things, the new Google Ads Manager will now also include DoubleClick advertising technology and Google Analytics 360 for tracking and analyzing website, customer and marketing data so large sellers can track and manage their campaigns better.

Publishers now have access to Google Ad Manager, which includes DoubleClick for Publishers and DoubleClick Ad Exchange, enabling efficient management of their inventory.

So the DoubleClick brand also had to go.

So with this rehash, Google has helped large and small sellers and publishers with specific, more accessible tools that work across devices and platforms for maximum effect.

YouTube Helps Creators Monetize

With advertisers confronting it about the kind of content their ads are displayed against, YouTube changed its content rules. However, this led to the concern that creators couldn’t raise enough advertising revenue on the platform.

Possibly as a remedial measure, YouTube is now introducing features to help creators make more money. So now, YouTube channels can offer channel memberships of $4.99 a month for exclusive content. Earlier, the feature was available to only a few “sponsored’ creators.

All U.S.-based creators with over 10,000 subscribers can also directly sell their merchandise on the platform.

The new live streaming feature called “Premiers” allows people watching the prerecorded video as a live stream to pay for better visibility of their comments. The feature is called “super chat”.

Privacy & Regulatory Matters

It’s barely a month since GDPR went into effect and already people are finding out that technology companies don’t really intend to comply, or, that they will make it the hardest possible thing to adopt.

Max Schrems may have been the first to complain, but a recent report from The Norwegian Consumer Council (NCC) shows that many others will follow suit.

The NCC says that companies like Google and Facebook (FB - Free Report) are using “dark patterns” that are “meant to manipulate” people into selecting the most intrusive options. What’s more, they are resorting to misleading wording to give users an “illusion of control” while hiding privacy-friendly choices. It also found that Facebook’s social network and Google’s Android were architected in a way that made it difficult for users to share less of their personal information.

Moreover, right up to the time the law went into effect, the companies were threatening users with loss of functionality or deletion of the user account if they didn’t accept the most privacy intrusive option.

All of this apart, their products are designed to turn users away from privacy-protecting options. For instance, Facebook’s Accept button is blue and you can agree to be tracked with one click. But the “manage data settings” option is grey and promises many choices and clicks, with the need to understand multiple layers of tricky language. Users generally just want to get on with it, so they are very likely to go with the Accept button.

The GDPR had provided against this sort of thing, but technology companies won’t allow it unless consumers spend tons of money in court. The penalties are too low it seems.

Meanwhile in the U.S., California lawmakers passed the California Consumer Privacy Act of 2018 (known as AB375) that will go into effect in 2020. The state has often taken the lead in legal matters and other states as well as companies with inter-state operations have adopted the California law because of its being the most stringent (automotive emission laws for instance). AB375 is similar to GDPR in some ways, offering consumers the right to request information businesses have on them, to get it in portable format, to have it deleted if desired and to object to its being sold. Google’s response while recognizing the time constraints under which it was framed and its impact on businesses of various sizes: “We appreciate that California legislators recognize these issues and we look forward to improvements to address the many unintended consequences of the law.”

Also, the Vietnamese cybersecurity law that goes into effect on Jan 1, requires foreign Internet companies to open local offices, store their data inside the country, hand over data to the government with respect to users suspected of anti-state activity.

Company Policy

The company has seen some issues with the way employees have been communicating with each other on internal message boards and forums. Google has in the past encouraged no-holds-barred discussion on work-related as well as other issues with the objective of promoting free thinking and innovation. However, not everyone could handle this openness, leading to personal attacks that instead led to an unhealthy operating climate with a corresponding negative impact on productivity. So in an email to all employees, Google CEO Sundar Pichai has now specified four very broad communication guidelines in the hope that the situation improves:

-       When communicating, Google Values are to be kept in mind. So better respect the user, the opportunity and each other.

-       Googlers are required to maintain a safe, productive and inclusive environment for everyone, failing which Google will remove groups, revoke commenting, viewing or posting privileges and take disciplinary action as warranted if discussions or behavior do not align with its values or are disruptive to a productive work environment.

-       Discussions that make other Googlers feel like they don’t belong are to be avoided. So blanket statements about groups or categories of people are discouraged. Trolling, name calling and ad hominem attacks will not be tolerated.

-       Consider your words and your reach. Inappropriate behavior will be punished and since the corporate systems are accessible to Google, it reserves the right to make the information discoverable in court or shared externally without permission. Google will also investigate and review complaints against anyone.

Separately, Google has chosen General Electric’s global affairs chief Karan Bhatia to head its efforts at public policy formulation and strategy with respect to things like artificial intelligence, job creation and critical infrastructure. He replaces Caroline Atkinson, who vacated the position in September last year.

Mountain View Head Tax

Mountain View residents will decide in November whether companies operating in the city will pay a tax based on the number of employees, now referred to as “head tax”. The City Council determined the tax to be $9-$149 per employee, raising around $6.2 million, still short of the $10 million it originally sought to raise. About two-thirds of the amount is expected to come from the seven largest operators including Google.

Google, the largest employer in the city, is likely to be the hardest hit, with an estimated tax liability of around $3.3 million per year, including an annual fee of around $584,000 and a $150-per-employee "head tax" for each worker beyond the first 5,000. This is of course loose change for the tech giant.

The money will go toward affordable housing and easing the traffic situation, both of which have been adversely impacted by technology companies coming to the region.

Opinion: Morgan Stanley

MS analyst Brian Nowak thinks the company should spend an estimated $3.3 billion to give away its Google Home Mini smart devices for a greater share of the smart home speaker market. That’s because he expects a rapid uptake of voice-based shopping and other activity, making these devices vital for technology companies looking to guzzle data. Since Amazon already has a head start on Google (an estimated 62% for Echo versus 33% for Google Home by 2018-end), there’s no time to waste. Nowak says that by 2022, 70% of U.S. households will have some form of voice controlled home device and if Google doesn’t buck up, most of those are going to come from Amazon. This will have a significant negative impact on its search and retail business.

 

Recommendation

Alphabet shares carry a Zacls Rank #4 (Sell). Better options in technology include Match Group (MTCH - Free Report) , The Trade Desk (TTD - Free Report) ,  21Vianet Group (VNET - Free Report) , or Dropbox (DBX - Free Report) . Or, you can also take a look at the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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