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Alphabet Inc Class C GOOG

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Google Won't Allow Individual User Tracking; Slight Negative for Criteo, Positive for Ad Agencies

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

Similar to what we anticipated in our Feb. 3 note, Alphabet’s Google announced that after third-party cookies are phased out in 2022, it will not accept any substitutes that track, identify, and target individuals with ads on its Chrome browser. Instead, the firm will put users into groups and create only group identifiers based on user interests, which then can be used by advertisers to target. While contextual and group targeting may lower the effectiveness of ads, it will address some data privacy concerns, which bodes well for the firm in the long run, in our view. However, this will not help Alphabet with regard to antitrust issues, as we think it will make it more difficult for ad-tech competitors to tap into Google’s platform. We think the move may negatively affect some ad-tech firms and have a positive effect on ad holding companies and their agencies, as well as larger brand advertisers.

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Company Profile

Business Description

Alphabet is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

1600 Amphitheatre Parkway
Mountain View, CA, 94043
T +1 650 253-0000
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 135,301