Alphabet Decides to Shell out Higher Dividends to Drive Traffic-Investors Show Concern
Alphabet- the Google parent firm, has been enjoying growth rate of more than 20 percent in its revenue for the past five quarters. However, Increasing TAC- (Traffic Acquisition Cost) which is the cost of driving relevant traffic to the website is one of the few things that is bothering the investors of Alphabet Inc. On Monday, July 24, 2017, the company quoted that the Traffic Acquisition Cost (TAC) has jumped to twenty eight percent (US$ 5.09 billion) specifically in the second quarter.
This is the highest increase in the percentage of TAC since past nine years. Business analysts claim that the percentage will continue to increase its margin as the fundamentals of the company remain sturdy and robust. The shares of Alphabet Inc. which gushed to twenty six percent this year, glided down to three percent in early trading sector on Tuesday. Google primarily relies on its trusted partners like Apple Inc. which has marked Google as the default browser in their iPhones and iPads. Apple also pays sites to run their ads.
In a client note, analysts from Goldman Sachs wrote that the company is continuously citing programmatic and mobile as major drivers of the entire increase in the Traffic Acquisition Cost, which will probably continue to boost in terms of the revenue percentage in the predictable future. The firm has cautioned that the expenses on traffic acquisition is expected to constantly rise in the future as the migration to mobile marketing will continue and programmatic advertising- a type of advertising where the advertisements are sold, bought, and displayed by many automated systems- continues to become more and more important.
Despite of having concerns about the Traffic Acquisition Cost, most of the analysts stayed upbeat about the potential of their company to constantly grow profit and revenue at considerable rates.
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