October 25, 2018 / 9:47 PM / 23 days ago

Breakingviews - Alphabet ad machine aids Tim Cook’s data case

An illuminated Google logo is seen inside an office building in Zurich September 5, 2018. REUTERS/Arnd WIegmann

NEW YORK (Reuters Breakingviews) - Alphabet’s ad machine is aiding Tim Cook’s data case. The Google parent raked in more revenue and profit during the third quarter. The stronger the $730 billion firm gets, the more scrutiny it will attract from watchdogs who want to safeguard consumer data. The Apple boss’s willingness to call for tighter privacy restrictions is a telling sign.

Google’s autopilot continues to guide the company higher. Revenue increased 21 percent as rising numbers of searches, especially on mobile devices, allowed the company to serve up more ads. But attempts to diversify remain relatively modest. Lower-than-expected growth in non-advertising revenue hit Alphabet shares in after-hours trading, wiping out an earlier gain of more than 4 percent. Still, given that people are spending more time online, advertisers have little choice but to follow them, creating a big wind at the company’s back for many quarters to come.

Alphabet is attracting unwanted attention, though, as European and U.S. regulators examine consumer data privacy, the use of social media by foreign actors to influence domestic politics, political bias in search results, and anticompetitive behavior by tech giants. The company has tried to keep a low profile on those issues. During Senate hearings on election interference in September, it refused to send founder Larry Page or Google head Sundar Pichai to testify alongside the chief executives of Facebook and Twitter. Senators put out an empty chair to symbolize Google’s absence.

So far this strategy has had some success. Sure, Google was hit with a $5 billion fine in Europe this summer for allegedly using its Android operating system for mobile phones to bolster its dominance in search. But Facebook has been the No. 1 target for most of the public’s ire over targeted advertising and data privacy, even though Google also collects prodigious amounts of personal data.

The growing volume of public concern is dragging Google into the debates nonetheless. And company actions, such as sitting for months on the fact that hundreds of thousands of Google+ accounts may have been hacked, doesn’t help. Rivals’ knives are also coming out. Tim Cook warned in a speech in Brussels on Wednesday that a “data industrial complex” has risen up, and personal data “is being weaponized against us with military efficiency.” He also called for a U.S. federal privacy law.

Google’s continued growth makes a reckoning virtually inevitable.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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