Alphabet: Profit woes

Alphabet’s fourth-quarter profit missed analysts’ estimates, hobbled by rising payments to Google’s Web-search partners, higher marketing expenses and troubles at YouTube that weighed on its advertising business during the holiday quarter.

The Mountain View company 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. Excluding this cost, profit was $9.70 a share, falling short of the average analysts’ projection of $10.04.

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 the acquisition costs, rose to $25.9 billion. Analysts had estimated revenue of $25.6 billion.

Investors have been watching for answers about the impact of turbulence at YouTube on Google’s growth. Advertiser outcry over offensive content on the 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.

Google’s historically fat margins are also under threat. The amount Google makes per ad has steadily lowered as mobile phones rise in popularity, but sales on Google’s own properties, like search and YouTube, kept growing. During the fourth quarter, that costper-click fell 14 percent. Some analysts suggested this drop reflects a slowdown in the number of ads Google can cram onto the smaller screens.

In other Alphabetrelated news from Thursday, former Stanford University President John Hennessy has been named as chairman of the company’s board of directors, replacing Eric Schmidt.