Google parent Alphabet Inc.’s fourth-quarter profit missed analysts’ estimates, hobbled by rising payments to web-search partners, higher marketing expenses and troubles at YouTube that weighed on its advertising business during the holiday quarter.
Alphabet reported a hit to earnings related to taxes owed on overseas cash following recent changes to U.S. law. This $9.9 billion tax expense resulted in a net loss of $3.02 billion, or $4.35 a share, the company said Thursday in a statement. Before that cost, profit was $9.70 a share, falling short of the average analysts’ projection of $10.04. Alphabet shares slipped about 2.7 percent in extended trading.
Traffic acquisition costs, payments to phone makers and web browsers, rose to $6.45 billion, or 24 percent of Google’s overall ad revenue. Google has attributed the surge in that expense to the rising number of ads it runs on YouTube, mobile devices and automated systems, which require sharing more money with partners. Alphabet’s total sales, minus TAC, rose to $25.9 billion, in line with the average analyst projection of $25.6 billion, according to data gathered by Bloomberg.
Investors have been watching for answers about the impact of turbulence at YouTube on Google’s growth. Advertiser outcry over offensive content on the massive video site started in early 2017 and then resurfaced in the fall, after grotesque videos were spotted on YouTube’s channels for children. Several marketers paused spending to avoid having their spots run alongside the content in question. Google doesn’t break out YouTube sales.