Blogs -Alphabet Stock: Keep a Close Eye on Third-Party Ads

Alphabet Stock: Keep a Close Eye on Third-Party Ads

April 09, 2019


Beth Kindig

Lead Tech Analyst

Data privacy will be affecting stocks into the near future and will likely catch Wall Street off guard as the minutiae is hard to sift through. Alphabet’s data machine has the longest tentacles of any company on the public market today, yet Facebook continues to carry the headlines. There are specific reasons that Alphabet has done a much better job at handling data, which in turn, creates a safer stock for investors. Even if some of the Google’s data collection policies are at odds with privacy advocates, Alphabet is being more transparent through SEC filings and offers a disclosure around revenue sources.

Last week, there was an important insider leak reported in Adweek that Google is “contemplating a number of changes to its consumer -and advertiser-facing tools.” Criteo’s stock dropped 30% when the news broke and TradeDesk saw a 15% drop while Alphabet’s stock showed the least impact at 5%. I believe this market reaction, which penalized Alphabet the least, is due to a misunderstanding around the implications of third-party revenue for Alphabet.

This analysis will break down why the intel leaked to the ad industry late last month is important for stock investors to pay attention to.


The official list of companies who are in a grey area with how they collect and use data is Google, Facebook, Amazon, Twitter and Snap. You can add Spotify to that list too, although their data is minor compared to the bigger players. The reason these companies are at risk is because there is a conflict of interest in collecting first-party data with people you have a direct business relationship with and brokering this to third-party companies.

Let’s reframe this so it’s easier to picture. For instance, what if your credit card company brokered your data to run ads? They have more information on you than Facebook or Google because Mastercard and Visa knows your every purchase. They would make A LOT of money if they anonymized your data, assigned you an ID number, and let advertisers target you based on what you bought with your credit card. In fact, purchase history is the most valuable data to an advertiser and they would pay much higher amounts for this than social media data or search data. Mastercard and Visa don’t do this because it’s against regulations. This is what the online and mobile industries face who are brokering first-party data to third-party companies to target people and run ads.

Going back to Google. Of the companies listed above, Google is being the most proactive and has the least amount to lose (Amazon is a close second with the least amount to lose). This is because Google makes money from search engine inquiries, with advertisements based on your search criteria, and not targeted to who you are as a person. However, there’s a chance that Google could lose up to $5 billion per quarter if the insider information to AdWeek is accurate. One reason is because if Google prevents ad networks from running ads in the Chrome browser, they will risk anti-trust if they continue to do so themselves. There is also a conflict of interest for first-party data companies to run third-party ads through a demand-side ad platform, where advertisers go online to place ads using proprietary data.

Especially if Google wants to be a leader in artificial intelligence, which will require a privacy adherent company policy, it is my prediction that Google will part with the third-party ad revenue to win big on AI in the coming years.

Intel from the Ad Industry:

Here’s an excerpt from the Adweek article Google Mulls Third-Party Ad-Targeting Restrictions: “According to sources, certain Google teams want to placate the growing zeitgeist around the protection of consumers’ data privacy, which has grown ever louder since the Cambridge Analytica scandal last year. These internal discussions also follow the implementation of third-party tracking restrictions on Apple’s web browser, Safari, and similar moves from Mozilla’s Firefox and Brave’s offering in recent months. Although the various businesses within Google advocate similar measures, the breadth of the company’s interests (i.e., the dominance of its Chrome browser and ad-tech stack) make its decision-making process more complex.”

What you need to know:

There are two issues here. As the article points out, Google will likely cut off third-party ad companies from brokering through the browser on Chrome similar to Safari and Firefox. The issue is that if Google continues to broker ads with first-party data while cutting off competition, there will be antitrust repercussions. Plus, this doesn’t address the grey area as to why Google is using first-party data to broker ads in the first place, as this is against regulations in the EU already and highly contested in the US (with Facebook taking a lot of the blame). This brokering of first-party data is what “ad-tech stack” refers to.

The leak was enough for Criteo to be downgraded from $32 to $24 by financial analysts and TradeDesk dropped from $213 to $185 the day the news broke. Alphabet stock remained relatively stable although I believe this was the market not fully understanding Alphabet’s tech stack.

Disclosure of Third-Party Revenue

In the introduction, I stated that “there are specific reasons that Alphabet has done a much better job at handling data, which in turn, creates a safer stock for investors.” The primary reason Alphabet makes a safer investment is that you can evaluate the stock for risk because the company discloses third-party revenue it makes from this grey area in their SEC filings. Facebook, and the others, do not disclose this as a separate line item, which makes it impossible to quantify the risks.,format

The line item that the leak refers to is “Google Network Members’ properties revenues,” which is $5.6 billion in revenue, or about 15% of quarterly revenue. The actual net income is much lower as Google pays out 70% to publishers, which is the Total Acquisition Cost, or “TAC to Google Network Members.” This leave the income for third-party sites at $1.7 billion per quarter.,format


On the Q1 2018 earnings call, analysts asked Sundar Pichai if the GDPR would affect the company. He stressed the importance of search engine revenue which is GDPR compliant, as it does not target people, rather it uses search inquiries. Although Waymo operates cars in the streets, and there have been many other speculative releases such as Google Glass, it’s important to remember that Alphabet’s revenue is 86% advertising.

Google Network Members’ revenue is at risk right now due to privacy regulations in the EU and ongoing scrutiny by regulators in the United States. It is my prediction changes will occur to Google’s third-party member sites revenue, and that the market misunderstood the impact it could have on Alphabet. Although there is no way to time exactly when this will occur, Adweek’s sources said they believe it will roll out by 4th quarter of this year.

Gains of up to 403% from our Free Newsletter.

Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+344% on Nvidia

+403% on Bitcoin

+218% on Roku

*as of March 15, 2022

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 324% on Zoom, 601% on Nvidia, 445% on Bitcoin, and 4-digits on an alt-coin. The I/O Fund is audited annually to prove it’s one of the best performing Funds on the market with returns that beat Wall Street funds. 


More To Explore


Nvidia Will "Still" Surpass Apple's Valuation

Nvidia Will “Still” Surpass Apple’s Valuation

My coverage on Nvidia as an AI leader began in 2018 (yes, really – five years ago). Since then, I’ve covered the AI microtrend for this specific stock 27 times on my research site, which is the equiva

May 29, 2023
Microsoft Building

FAAMG Stocks Trading At Precarious Valuations

The mega-cap stocks that are known as FAAMG reported earnings recently. These names are driving the market higher, especially Microsoft and Apple. In fact, the percentage of Microsoft and Apple’s comb

May 15, 2023
Apple PC Screen

Apple’s Stock In Focus: More Profitable Than Banks

Investors looking for the “next big thing” will point toward companies like Stripe, Sofi or Square as the leading fintech stocks. Meanwhile, the next big thing to disrupt the financial sector may be s

May 04, 2023
Netflix Remote Control

This Stock Price For Netflix Is A “Buy” For 2023

In April of 2022, Netflix surprised the markets by reporting its first subscriber loss in nearly 10 years. The stock tumbled 35% the following day, as investors panicked. Famed hedge fund manager, Bil

May 03, 2023
Where the I/O Fund Holds Cash When Banks Keeps Failing

Where the I/O Fund Holds Cash When Banks Keeps Failing

Amidst the growing skepticism in our banking sector, we thought it would be helpful to introduce an alternative way to both protect and diversify one’s assets. The information below discusses a method

April 20, 2023
Tesla Building

Tesla Stock: What You Need To Know About Q1 Earnings

Two months ago, we wrote that after realizing gains of 31%, it was time to take a time out on Tesla at the $208.31 price when our firm stated: “Right now, our technical analysis is at odds with our fu

April 16, 2023
Bitcoin Vs Banks: Here's Where the Price Goes Next

Bitcoin Vs Banks: Here's Where the Price Goes Next

The recent decoupling of Bitcoin from equities, we believe, is the start of a new uptrend that appears to be inversely correlated to the financial sector. The financial media would have us believe tha

April 05, 2023
Official Press Release: I/O Fund's Cumulative Returns Double the Nasdaq Following a Tough 2022

Official Press Release: I/O Fund’s Cumulative Returns Double the Nasdaq Following a Tough 2022

Actively managed portfolio and research site announces its largest cumulative lead over institutional all-tech portfolios. The I/O Fund defies a challenging market, outperforming peers and providing i

March 30, 2023
Slowdown in Cloud Stocks on Thin Ice Following Q1 Guides

Slowdown In Cloud Stocks On Thin Ice Following Q1 Guides

Following last quarter’s earnings, we published an analysis on cloud that showed hyperscalers were slowing (5%) sequentially and best-of-breed was slowing (12%) sequentially, based on Q4 guides.

March 29, 2023
NVIDIA Showcases AI Breakthroughs, Omniverse Platform, and New Partnerships at GTC 2023

NVIDIA Showcases AI Breakthroughs, Omniverse Platform, and New Partnerships at GTC 2023

The tech giant reveals cutting-edge AI advancements, a powerful cloud based Omniverse platform, and strategic collaborations in the automotive industry.

March 28, 2023

Sign up for Analysis on
the Best Tech Stocks
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio of 30 positions, a private forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks

Copyright © 2010 - 2023
Get Free Weekly Analysis on the Best Tech Stocks