Alphabet Shares Dip as Some Ad Business Costs Increase
The share decline came as Alphabet’s Google unit reported a pair of disappointing figures related to the company’s successful advertising business. First, the company reported that Google’s “cost-per-click”—the amount advertisers pay Google each time a user clicks on one of their ads—declined 23% from the same period in 2016, which was a much greater drop-off than the roughly 15% decline that analysts had forecast. The reason behind the decline is the increase in mobile search traffic for Google, as mobile ads cost less than desktop ads.
Meanwhile, Google also reported a 28% increase in traffic acquisition costs, to $5.09 billion, from the same period last year. In an earnings call with investors, Alphabet CFO Ruth Porat admitted that the company expects those costs—the amount it pays to partner websites— to continue increasing as more search traffic continues its shift to mobile devices.
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Even with higher costs associated with Google’s revenue-driving ad business, the company still posted huge revenue gains in the most recent quarter. Ad revenue at Google alone jumped more than 18% to $22.67 billion, accounting for 87% of the company’s total business as Google continues to dominate the market for digital advertising dollars. The biggest blip on Alphabet’s overall earnings report on Monday came in the form of the previously announced $2.7 billion fine imposed on Google by the European Union’s antitrust regulators. That massive hit resulted in Alphabet reporting a 27.7% dip in quarterly profit year-over-year.