I find it interesting that income more than tripled compared to the previous year's quarter, but their effective tax rate dropped from 24 percent to 18.
It’s an interesting idea, imagine the smallest viable size for a computer manufacturer is $10 million, then after that start applying progressively higher taxes to discourage market domination and encourage competition.
I don’t think it would work but there is some appeal to it.
I think there is a point where a company accumulates too much power through its sheer size and further growth is not desirable. I would argue google and others have reached that point.
Market economy is like fuel combustion - it's only valuable to society if controlled. You want the combustion to happen to drive the things that matter (wealth and happiness of the society), but you don't want it to get out of control. You want a wealth-generating engine, not a raging gasoline fire.
Who thinks "I made $61 after tax profit on the last $100 of profits but I will only make $59 profit on the next $100 so I'm gonna chooAe to not make that $59 after tax money.
This is a genuine question. Is there any research or evidence that shows that increasing taxes on profits (which is what corporate taxes are) reduces pre tax profits in the US (I'm restricting to the US because it's possible other places have had more ridiculous njmbwrs, even leading to greater than 100% taxes). This isn't a rhetorical question.
The same applies to progressive income tax, but I know someone who actually did choose to forego additional income but it waS someone who didn't understand progressive taxes and thought the headline figure apuwd to their entire income instead of the marginal income.
I'm assuming reasonably sized companies aren't that stupid.
To play devil's advocate, assume you are Google or Apple. You have (quite literally) 100 Billion dollars in cash equivalent securities sitting around. You could do what amazon does and reinvest those into the business, but there is risk, and decreasing returns on that. Alternatively, you could just invest that money (in which case its not profit, so taxed differently, I believe), or you could pay your employees more.
Those second two are, in the long run, potentially worse for investors. Is that good or bad? Unclear. Is that even how the calculus works? Unclear. Is this line of reasoning obviously wrong? No.
Then you make a bunch of loosely related subsidiaries that do the same thing (see the canadian wireless market) but are owned by the same large company.
Here is the most interesting sentence: "Prior period results
excluding the effect of the European Commission (EC) fine of $5.1 billion have been included to facilitate comparison
to current quarter performance".
Honestly, the trippiest thing to me, is that European Commission fines being marked as an ordinary expense line (and likely one that will be used more in the future), they really are making it clear that violating the law and paying the fines for doing so is really just part of ordinary business to them. And obviously, the fines clearly aren't punitive enough to encourage them to revise this behavior.
This is literally textbook how-to-do business, if the fines are smaller than what you earn from doing it, you keep doing it because it's profitable.
It's why Facebook's $5bn FTC fine is laughable too. You need to fine them an amount relative to their market capitalization to really make 'em feel it, probably around 10%. I'd go as far to say, one would need fine them in the $50-$100bn range to really stop them from doing something (same for any of the $500bn+ companies).
If it's profitable to be shitheads, they're are going to account for it, and be shitheads.
FB's net profit for Q2 was $1.6bn. Close to a year's profits were wiped out from this fine, which is roughly 1% of Switzerland's GDP. I don't see how this is laughable.
A fine of 10% of market cap is close to the company's gross revenue. This is equivalent to a government owning the company. This "smells" like communism mentality.
How is fining them an amount large enough to deter their behavior communism? Full stop, how?
What you're saying is that fines large enough to actually affect the company, to make their shareholders realize a loss of (monetary) value as a result of bad management, is communism?
That to me is simply insane, and I'd highly encourage you to go take some upper division economics courses before rattling off what is and isn't communism.
1. FB's market cap is $573bn. 10% is $57.3bn. 2019 Q2 profits were $1.6bn.
2. By your standards, it is perfectly fine for a government [entity] to tell a private company: "If you don't do exactly as I ask, I will get all your profits for roughly the next decade." That, according to you, would be teaching FB "good behavior." To quote you, it will "really make 'em feel it".
3. Communism is a system of government in which the state plans and controls the economy and a single -- often authoritarian -- party holds power.
I mean, I think the parent's position is generous, considering what I think many others would agree would be fair: That a company that has wronged a country's citizens as deeply as the Facebooks and Googles of the world have should simply be terminated, executives jailed, and assets seized and either auctioned or redistributed. For companies built on societal harm, they should have to fight for their lives to remain in business.
If we want these sorts of businesses/behaviors to stop cropping up, we need to make societal harm a huge risk factor for investors.
Sure. Some may even find your stance too sympathetic. There are countries where, today, executives would be jailed or executed for the harm they've brought upon their users. Such insane views are the norm for other countries, but not for a democratic country like the US. What was FB's crime again, that deserves for it to be wiped off the face of the planet ?
Of course it is perfectly fine and within your rights to believe and say that the world would be better off without FB (and Google no less!) but you must understand by now that your opinion is that of a tiny minority.
To answer in good faith however: I do agree with the spirit of what you are saying. Companies should be held accountable and fines are probably a good tool to achieve that.
1. And? This has nothing to do with anything I talked about you're just stating facts without a point.
2. If you're only looking at profits, then you're missing the entire point of running a business like Facebook, because that's not the point. The point is to increase shareholder value whether that's actual profit, or an increasing stock value. To only look at their profit, which can be easily manipulated with GAAP accounting, is pretty much negligence. Look at Amazon choosing to run in the red for decades...
3. Communism isn't a system of government. It's an economic system, that is to say a system for managing resources.
QED
P.S. One last thing, you work at Google, of course you're going to be against these fines or proposing them.
- make sure it's repeatable process (i.e. FB do what they want to generate revenues. FTC succeeds in fining FB with accompanying political wins, bonuses and promotions that somes with it)
I think you're reading more into it than you should.
The line where the EU fine is marked is in the table of revenue vs. costs & expenses as part of an accounting formula: "Revenue - Costs = Income from operations". Even if you were planning to stop paying it in 2020, where else would you list the fine?
>On July 24, 2019, the Board of Directors of Alphabet authorized the company to repurchase up to an additional $25.0 billion of its Class C capital stock
The reason the stock is up so much. They're going to stop blowing money on stuff they aren't good at.
No because it's wrong. The correct way to say this is that by doing a buyback it allows stockholders to realize their taxes at a later point in time since capital gains are only realized at the time of sale. Dividends are immediately taxed at the capital gains rate which is the same as the LTCG rate.
You are right about the buyback allowing shareholders to delay the taxable event. But you are wrong that dividends are taxed at capital gains rate. They are taxed as income.
Capital gains are taxed at capital gains rate (almost always lower) and they gain can be offset by losses. This is the main advantage of stock buyback.
I'm not an accountant, but I believe if the dividend comes from an American company, and you've held the stock for over 60 days, it's a qualified dividend and gets taxed at the long term capital gains rate.
Not an expert but I'll give it a shot: Company has extra money and wants stakeholders to get a cut. They can either give all the stakeholders some money based on how much stock they have (this is called paying dividends), or they can buy back stock, raising the stock price (reducing the amount of stock means a given stock now corresponds to owning a larger stake in the company). Dividends would be taxed as income for investors. The increased stock value would only be taxed if/when it was sold for a profit (capital gains tax).
Edit: dlp211 points out the income from dividends is (generally) taxed at the same rate as long term capital gains.
If there are 100 shares of a company worth $1000 each - the company has a value of $1000/share * 100 shares = $100,000.
The company has $10000 in after-tax profit that it would like to distribute, and you own 1 share. Since the money will be gone, the company will be worth $100,000 - $10,000 = $90,000 after the distribution.
- The company could pay a $100 per share dividend. You would get a $100 dividend but have to pay (say) 15% tax, so you now have $85 cash plus 1/100 of the company ($900), so $985.
- OR the company could buy back 10 shares. Now each share is worth $90,000 / 90 shares, or $1000. You don't pay any tax, your share is worth the same, but now you have 1/90 of the company instead of 1/100, so a greater share of future earnings.
In real life, the value of future earnings dominates the price (well, hope and greed do, but whatevs) rather than the cash-on-hand. The price should immediately go up once the buyback is announced to reflect that existing shareholders will get a bigger piece of the pie. That increase is not taxed until they sell, and the shareholder comes out ahead for the same cash distribution by the company.
This is a great explanation, but who would sell their share back to the company for $1000 if the value of the other shares will increase immediately after the buy-back?
I assume that if it's expected the company shares will go up in value due to the buyback, then they will have to pay a premium and buy the shares at a price that is close to the post-buyback share value.
So, perhaps at $1010/share.
However, I think there's no premium price equal to the post-buyback share price that they can pay to buy back shares that doesn't result in the company total value increasing as a whole from the buyback. This seems to be a contradiction.
I can only conclude that it isn't known that the buyback will raise share prices, because the loss of capital from the company should balance the increased fraction of future earnings that each share represents.
(edit: rewrote post after working through its logic).
The a logical equation assuming perfect rationality and an infinite timeline with a company that is only growing. Reality is clearly much more complex and there are thousands of reasons why someone would sell their shares.
It's not the only difference. Dividends are paid to the shareholders of record as of a certain date. Buybacks effectively benefit all the future as-of-yet-unissued shares, e.g. unvested stock-based comp (which makes it a beloved thing for corporate executives who get their majority of $$$ that way).
Just to be perfectly precise, dividends are usually taxed as income, but an increased valuation as a result of a buyback would only be taxed as capital gains when the shares are sold.
If there weren't a separate capital gains rate, then the only difference would be the tax would be collected when the shares were sold rather than when the dividend was issued.
However, if you had the intention of reinvesting your dividend, then you would buy new stock with post-income-tax dollars, whereas a buyback would increase the value of your stock holdings without using your own post-tax money.
There is no logical reason that dividends should be taxed differently than capital gains (the result of stock buybacks) and really no reason either should be different than regular income.
It's not just the question of capital gains. Dividends mandate a taxable event. Buybacks give you the option to continue holding and not pay taxes. That option has value.
Stock buybacks versus capital gains makes all the difference for Belgian residents. No capital gains here. Foreign dividends get taxed at >= 40.5%, local dividends at 30%.
Which is why accumulating funds are getting rather popular in Belgium...
I just highlighted one aspect of the Belgian tax system relevant to the discussion. Observing a tax avoidance loophole does not in any way correlate to bragging about it.
Just to make things absolutely clear, I'll even happily make it explicit: I oppose it.
I have no problem with only paying taxes when they are realized. I think I would be okay with not being taxed on dividends if they are reinvested within x number of days.
Maybe? If the alternative to investment is spending the money, this boosts the economy.
Also, given the eagerness of investors to gamble on unicorns, it's unclear that there is any shortage of investment money. Occasionally there's talk of a global savings glut.
Why wouldn’t spending money boost the economy? Besides when you “invest” in a publicly traded company, unless it’s at the IPO or another stock offering by the company, the company never sees the money and they aren’t getting any money from you.
This was debunked with the cap gains tax breaks made in the early 2000s. Lowering the tax rate did not stimulate more investing activity, just cut government revenue.
Do you donate money to your government above and beyond your taxes?
I don't mean to impugn your political feelings. I consistently vote for people who will raise my taxes, personally. That doesn't mean I'm volunteering to pay more than I'm obligated within a system that doesn't provide the social services my family needs. I just want to point out that almost no one pays more taxes than they are legally obligated to, regardless of their political views. This implies that substantially everyone sees value in optimizing their taxes.
In light of that, surely you can understand why the question you asked does not make much sense? The law is what it is, so of course within the law people will attempt to pay less taxes.
Investors have always disliked Google's bad capital allocation. They'd much rather have the cash. The expansion in the buyback is a signal for a new era of capital return.
This kind of thinking leads to companies becoming irrelevant over time. I for one would much rather go for an interesting 50-year vision instead of pushing for quarterly stock gains exclusively. Ad revenue growth is slowing down across the board. FB is still showing increased growth because of Instagram which is just so perfect for ads. AMZN is a small player to begin with, so their growth will naturally be high. Also their platform is very well positioned for display ads and especially sponsored product ads because they tie in to their main business so well.
Alphabet will have ad revenue for a long time, yes. But cloud will eventually be more important. So they need to make sure they catch up to MSFT and AMZN eventually. And the moonshots are very important as well. Their very nature is risk. If successful anyone of them could potentially be worth hundreds of billions. Morgan Stanley speculates that Waymo could be worth a quarter of trillion in 10 years. DeepmMind and Google Brain/AI are two of the leading AI entities in the world. Wing could be very important for Google Shopping. And they really need to build out their shopping offerings. And then there are the healthcare/life science efforts. No one even knows what Calico is doing exactly.
What they are missing is basically a space initiative. Yes there is loon and Access but Amazon is already in the process of launching their Starlink-like satellite network. And then there is Bezos's Blue Origin.
My (amateurish) prediction is to be positioned in:
AI, biotech/genetic engineering, space industries.
I for one would much rather go for an interesting 50-year vision instead of pushing for quarterly stock gains exclusively.
That's great if you're, say, under the age of 50 and plan to hold your stock your entire life until retirement.
But consider a company whose stock price never went up but which had a great 50 year vision. Maybe towards the end of the 50 years it starts going up fast, but by then you already lived a big chunk of your life and passed many moments when you could have used some of the money.
At some point you're going to want ROI. One quarter is short for sure, but 50 years is the opposite extreme. Why wait such a long time for hypothetical ROI that may never come?
For Google specifically their problem is their revenue has way outpaced their ability to come up with new ideas. Since Larry Page stepped into the shadows the ambition and drive are gone. I'm not sure there's any vision, let alone a 50 year vision. The only highlights are their successes with AI, and maybe Waymo, but those are small parts of the overall company. AI mostly seems to be leading to incremental improvements in their existing products.
When you cast your eyes wider you see large amounts of what might uncharitably be described as self-indulgent waste. How many chat services are they up to now? And how many of them had any kind of interesting competitive advantage? How many languages and VMs without any obvious competitive advantage has Google created? How many internal systems do they rewrite without any clear idea of why, other than because someone needs to get promoted?
Dig around and discover just how many projects there are producing uncompetitive 'experimental' pseudo-products nobody has ever heard of and likely nobody ever will e.g.
Google has so many products they end up reusing their own names! Google Go is one thing, Google Gallery Go is a totally different thing - a mobile photo gallery app specifically for Nigeria, for some reason.
When you look at the firm closely you see a firehose of projects with zero business case and often near-zero impact. Why does Google think these things are better ways to invest the money than what other companies are doing?
> When you look at the firm closely you see a firehose of projects with zero business case and often near-zero impact. Why does Google think these things are better ways to invest the money than what other companies are doing?
Silicon Valley often sees "a firehose of startups with zero business case and often near-zero impact." And yet, it is considered a key driver of the economic growth / innovation / good jobs and places all over the world want to replicate its success. Maybe, Google just wants to have an in-house Silicon Valley?
In the hope that GOOG pays out cash in future. Either via dividends or stock buybacks.
At least, that's why I've been holding my shares. I was thinking of dumping them for better performing tech stocks, given the malaise I see there, but if they're finally starting to admit they may have run out of ideas and start returning money for reallocation elsewhere in the economy, then ... well ... maybe I'll hold a little longer.
I can't help but think that EU situation has helped Google. A flood of new regulation just keeps entrenching them by killing off any potential upstarts that could compete in Europe.
Isn't this the argument free-marketers have always made? The people who said GDPR would stifle competition? It will be a long time before the outcome of these choices are obvious.
I'll have to go digging but there already was a good article that made it to the front page here about how much GDPR has helped google. It had some great numbers and graphs showing a sizable increase to googles marketshare once they were the first ones to be "GDPR compliant".
Note that the 2 main arguments and counter arguments: it helps protect people's information vs it increases the barrier of entry are NOT exclusive. Both can be valid at the same time and I believe that in many regulations they are both valid. That's how life works, a chain of compromises.
Trivial example but the nekochan community for SGI retrocomputing shut down because of it. It's particularly hard for small business or unprofitable things done for fun/sport/public benefit.
I've seen many people shut down their side projects citing gdpr. Without fail it's always people who haven't really researched the impact gdpr has on them and they didn't really want to keep the project going anyways so it's more of an excuse to shut it down without facing backlash.
It seems like you are contorting the blame to "well you should just do more work!" Bureaucratic regulations have costs in implementation, enforcement and non-compliance. Those costs are naturally easy for corporations to absorb because they can hire people to do it full time or whatever the case may be. Maybe several hours or $1000 for a lawyer or whatever to review some regulation are a bridge too far for someone already devoting time and dealing with whatever negatives the side project is coupled with like less free time, negative users/customers/competition, and other opportunity cost.
So yes, taking on new and unknown (to the creator) legal liability from some regulation is a great reason to shut down a side project.
If you’re a hobby project or small business that’s already not collecting customers’ personal information, then what hard work do you have to do to comply with GDPR?
An IP address counts as personal data, so that means you can't use any PaaS without having a privacy policy and vetting your platform's policy (which requires legal skills), just because they might keep the logs.
All public Trello power-ups have to be GDPR compliant, for example. The requirements are laid out on their developer documentation page [1]. You have to poll an endpoint every 14 days to remain compliant, delete data on request, etc. If you're building a power-up for free/fun, it might make you think twice (just because of the payoff/effort ratio). But I'm going to charge money for my power-up, so something like this isn't really a big deal.
If you have time/money or plan to make money, GDPR compliance isn't terribly difficult. But free/cash-strapped service providers would probably think twice before becoming compliant (which is why a lot of local US news websites just don't allow European visitors -- compliance is somewhat expensive, and local news in the US isn't doing too great right now).
The GDPR is intended to protect user privacy, not "competition". Everything has side effects, but if a monoculture of online services is the price, my guess is the drafters of that law (which I'm not a huge fan of, FWIW) would be OK with that. This is the tech industry, we're always just a few decades away from everything being disrupted anyway.
There's other new EU regulations than just GDPR. The recent copyright ones do nothing for users but severally cripples startup competitors to YouTube, as an example.
My favorite thing about the GDPR is that it's both a secret plot to ruin Google and also a secret plot to protect Google, and I doubt even Google knows which it is.
There's nothing secret about it. Good regulation can help but it's very rare. Instead we have poor regulation done by politicians that don't understand the market or technology, and that always helps the incumbents.
Helping the incumbents isn't always a bad thing, despite what the startup world may say. In living bodies, weakening 'incumbents' against 'disruptors' is called "immunodeficiency".
The market isn't a living body though, and it's not about whether it's good or bad, only that it helps. In this case, GDPR-style regulation only helps big companies that already have lots of users.
A country and its economy may be seen like one, though.
But regardless, the overhead-inducing parts of GDPR really kick in when a company grows past certain size (250 employees), at which point it should be perfectly capable of handling them. But more importantly, upstarts aren't some protected class. Just because an upstart can't compete against the incumbent without resorting to abuse of personal data, doesn't mean abuse of personal data should be allowed. GDPR protects regular citizens from collateral damage to their privacy caused by market competition. If incumbents can do a better job not abusing the data, maybe they should get the benefits.
(Also, it's adtech we're talking about. Personally I want neither the upstarts nor the incumbents to exist, and I couldn't care less who GDPR privileges here.)
Nobody is arguing against data privacy. It's how that's done which is the problem with GDPR. If you call every criticism of bad regulation as a defense of "abuse of personal data" then it's nothing more than an emotional argument.
Adtech powers the internet and lets 99% of the content exist. Let's avoid the endless conversations over it. If you want every company to be treated the same, then every industry should be too.
I don't find much bad with GDPR. You can call this an emotional argument, but for me, it's a difference of priorities. I do believe GDPR is right and creating regulatory friction in the marketplace isn't something to be avoided at all costs - in particular, it's desirable when the regulated behavior is potentially harmful.
RE adtech, I don't think we can avoid this conversation as long as all the problems this industry is causing persist. And I don't want to have every industry treated the same. In my books, adtech is right there with selling hard drugs on street corners, and factories polluting rivers; I'm fine with getting rid of all of them. I do not want that industry to grow. As for the "99% of the content", I'd honest to god happily see it disappear. It's mostly garbage that wastes people time; in particular, mass-produced content marketing tends to have negative information value, making people wronger than they were before reading it.
Again, it's not about the regulation or privacy. It's about how the regulation actually works and the processes and procedures it requires that are being debated, with the current implementation being a poor example that isn't really having the intended effect.
> "adtech is right there with selling hard drugs on street corners, and factories polluting rivers"
Those aren't industries and the trillion-dollar market caps of advertising companies speak to commercial value. The world is more than just you, so you don't speak for everyone and your singular interests do not matter at all in this discussion and you use an adblocker or stay off the internet if you want.
I always take the time to have in-depth conversations about adtech here but you haven't said anything other than state an emotional position about what you want the world to be like. That leaves nothing to discuss.
Their intention was very likely ruining Google (and other US techs). But the result is inadvertently protecting Google. There's no conflict here; you're simply confused.
That is assuming Google's continued surveillance empire is actually found to be legal in the EU. Google claims they are complying with GDPR, but that's... unlikely.
We won't really know until they get taken to court over it.
It means more clicks. If CTR is constant, then it means more impressions (i.e. seeing more ads), or it could mean that ad targeting/serving is getting more intelligent. Probably both.
Stepping back for a minute, political polarization has be increasing for about the length of time that Google has been in business. I'm not claiming Google is the cause, but rather that Google's tenure is a proxy for an acceleration in political polarization. [1]
Polarization enables outrage. Think Antifa vs. Proud Boys. Pelosi vs. Omar. AOC vs. ICE. Outrage reduces the amount of critical thought people put into the information they see and use to draw or reinforce conclusions they have about other groups, in particular, their polar opposites.
Outrage drives clicks, shares, likes and retweets. Clicks, shares, likes and retweets drive views, views drive ads, ads drive revenue.
Now, toss neural nets into the cycle. Neural nets do in fact learn and improve as feedback loops transpire.
Why wouldn't we expect these systems to learn that among other things, information that increases polarization results in the desired goal of increasing revenue, absent of any deliberate intervention by human beings?
It rose after cable deregulation, which gave us 500 channels and dozens of 24/7 outrage outlets.
There was plenty of outrage going around on Fox and Rush Limbaugh talk radio before Google. Remember, Roger Ailes pretty much planned for a lot of this.
Google/FB etc makes a lot of money for (mostly) liberal people by making as many people as possible non-liberal. In the future the ML's sole job will keep that momentum going but will be trained on perfecting _exact_ ratios of polarization that's needed to prevent a civil war. In other words fine tuning where that tipping point maximized profit at an acceptable level of violence.
Since neural networks train using the data of the masses I would exactly expect the effect to funnel towards consensus as opposed towards controversy. Let autoplay run long enough and eventually we all get the same videos.
I think there's plenty other explanations for the current political climate. It has perhaps moreso to do with how the media was previously controlled by small number of big players versus the many smaller players we have today with more extreme views.
> Why wouldn't we expect these systems to learn that among other things, information that increases polarization results in the desired goal of increasing revenue, absent of any deliberate intervention by human beings?
This is all well and good, but revenue is not an input to most machine learning algorithms at Google. First off, there is a pretty serious firewall between search and ads, so any organic results will be completely oblivious to revenue. Search systems literally do not have access to that kind of information. Even within ads, the concept makes sense only if you don't think about it too much. The big money-maker ads are when someone is trying to buy something. Ads around viral content are just not something that people can pay much for, because the margins in the news business are very thin.
Now if you want to make an article that the media has learned that spectacle and outrage drive clicks, I am here for it. (But this has always been true. Yellow journalism was a thing more than a century ago.) And I guess you can make an argument that Google facilitates this by pointing you to the media, and by participating in the feedback loop. But I don't think Google revenue is as causally linked to outrage as you seem to believe. After all, correlation usually doesn't indicate causation.
I might be wrong but I was definitely told by a YouTube rep that videos that makes more revenue get promoted more on the platform. It's not the only signal, but it is a signal.
My thought is that there's a correlation between attention and a viewer's willingness to spend money that can be seen without directly looking at revenue. For instance, letting a music playlist run would look a lot different than watching a video I'm actively paying attention to. Or a detailed discussion on credit card churning would probably be more niche than a clip from SNL. But former would probably have a more engaged audience and be more willing to act on an advertisement for a credit card. So if you're optimizing for user engagement, you'll probably increase profit.
I use ad blockers so I don't how this theory would explain people with ad blockers that are political.
Neural network is bias because of the data. It's always the data. gfycat has an article about this. They have a huge user base that's into kpop and their training dataset didn't have much Asian people in it so it kept on identifying kpop star as women.
I hear this a lot - but are people really watching longform political YouTube videos and passively letting the algorithm choose their next video for extended periods of time? I very rarely watch a political video on YouTube but when I do it's usually linked from a site like Reddit, and then I'm very unlikely to watch the next video in the queue after it finishes.
If the algorithm actually does suggest more and more radical videos I wonder if it's a case of reverse causation - the algorithm suggests a more radical video because it learns what people actually want to do and choose to do, which is watch the most outrageous and/or bloodcurdling video out of the options presented to them?
I think they changed this or are working on changing it.
YouTube recommendations used to go towards more popular, meaning all playtime eventually went to Gangnam Style. So they went the other direction, and gave more view time to radical/fringe YouTubers, which they're getting flak for.
Yeah, the ironic part is that roi for advertisers on google search is low to negative. Not only does google sell its keywords, thus perverting the index itself, they also fleece the advertisers who seem to do buys solely to "keep up with the joneses". Most actually results-based advertising will avoid organic search buys; but most digital marketing companies are not results-based.
Incredible that Google has been able to sustain almost 20% revenue growth for so long - much longer than most people expected.
For the past 6 or 7 years people have been predicting that Google's growth would soon slow because:
(a) The number of ads on a search result page had reached saturation point
(b) The percentage of people using the internet in rich countries had reached saturation point
Although real, these effects have proved to be outweighed by other, less limited factors of growth; in particular Google's ability improve the quality of match between advertiser and user. Even now I think there is significant room for Google to improve this matching - eg. when I put an iPad Pro in my online shopping basket at apple.com but don't buy it, why don't I then see iPad ads on YouTube? When I give Tesla $1,000 to reserve but not buy a Model 3, why don't I then see Model 3 ads reading The New York Times? Apple and Tesla are leaving money on the table, and when they wake up Google will make even more money.
With your example, why would Tesla advertise to you after you have already converted on a purchase?
In fact, Tesla can use your email address on a negative audience list when advertising on display networks that hit publishers like NYT. I wouldn't be surprised if Tesla was doing this to optimize their ad spend.
For purchases where you are retargeted, that's because when you buy something, you're a magnitude more likely to purchase it again (i.e. as a gift, have a backup/travel one, etc.). Goods like automobiles are an exception here, unless you're in the business of buying multiple cars in the same month.
Sorry I wasn't clear - I haven't committed to purchasing a Model 3, I've simply given a deposit to reserve my place in the queue when they start shipping to Australia in August. I'm still not sure whether to pull the trigger now - I'll probably wait until better self-drive features become available, or may even decide not to purchase it and instead ask for my deposit back.
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[ 2.8 ms ] story [ 196 ms ] threadI don’t think it would work but there is some appeal to it.
Who thinks "I made $61 after tax profit on the last $100 of profits but I will only make $59 profit on the next $100 so I'm gonna chooAe to not make that $59 after tax money.
This is a genuine question. Is there any research or evidence that shows that increasing taxes on profits (which is what corporate taxes are) reduces pre tax profits in the US (I'm restricting to the US because it's possible other places have had more ridiculous njmbwrs, even leading to greater than 100% taxes). This isn't a rhetorical question.
The same applies to progressive income tax, but I know someone who actually did choose to forego additional income but it waS someone who didn't understand progressive taxes and thought the headline figure apuwd to their entire income instead of the marginal income.
I'm assuming reasonably sized companies aren't that stupid.
To play devil's advocate, assume you are Google or Apple. You have (quite literally) 100 Billion dollars in cash equivalent securities sitting around. You could do what amazon does and reinvest those into the business, but there is risk, and decreasing returns on that. Alternatively, you could just invest that money (in which case its not profit, so taxed differently, I believe), or you could pay your employees more.
Those second two are, in the long run, potentially worse for investors. Is that good or bad? Unclear. Is that even how the calculus works? Unclear. Is this line of reasoning obviously wrong? No.
Their 2018 income tax rate was 11% for the year. $4.1b in income taxes and $34.9b in pre-tax income.
In 2016 it was 19%. In 2015 it was 16.8%. In 2014 it was 21%.
It's why Facebook's $5bn FTC fine is laughable too. You need to fine them an amount relative to their market capitalization to really make 'em feel it, probably around 10%. I'd go as far to say, one would need fine them in the $50-$100bn range to really stop them from doing something (same for any of the $500bn+ companies).
If it's profitable to be shitheads, they're are going to account for it, and be shitheads.
A fine of 10% of market cap is close to the company's gross revenue. This is equivalent to a government owning the company. This "smells" like communism mentality.
What you're saying is that fines large enough to actually affect the company, to make their shareholders realize a loss of (monetary) value as a result of bad management, is communism?
That to me is simply insane, and I'd highly encourage you to go take some upper division economics courses before rattling off what is and isn't communism.
The idea that it won’t have any effect on Facebook’s behavior in the future is laughable.
He loves money just as much as everyone else.
1. FB's market cap is $573bn. 10% is $57.3bn. 2019 Q2 profits were $1.6bn.
2. By your standards, it is perfectly fine for a government [entity] to tell a private company: "If you don't do exactly as I ask, I will get all your profits for roughly the next decade." That, according to you, would be teaching FB "good behavior." To quote you, it will "really make 'em feel it".
3. Communism is a system of government in which the state plans and controls the economy and a single -- often authoritarian -- party holds power.
Maybe you should rethink your views.
If we want these sorts of businesses/behaviors to stop cropping up, we need to make societal harm a huge risk factor for investors.
Of course it is perfectly fine and within your rights to believe and say that the world would be better off without FB (and Google no less!) but you must understand by now that your opinion is that of a tiny minority.
To answer in good faith however: I do agree with the spirit of what you are saying. Companies should be held accountable and fines are probably a good tool to achieve that.
2. If you're only looking at profits, then you're missing the entire point of running a business like Facebook, because that's not the point. The point is to increase shareholder value whether that's actual profit, or an increasing stock value. To only look at their profit, which can be easily manipulated with GAAP accounting, is pretty much negligence. Look at Amazon choosing to run in the red for decades...
3. Communism isn't a system of government. It's an economic system, that is to say a system for managing resources.
QED
P.S. One last thing, you work at Google, of course you're going to be against these fines or proposing them.
The amount of fines are balanced to ensure:
- minimal legal pushback from FB side
- quick pay.
- make sure it's repeatable process (i.e. FB do what they want to generate revenues. FTC succeeds in fining FB with accompanying political wins, bonuses and promotions that somes with it)
Rinse and repeat.
The line where the EU fine is marked is in the table of revenue vs. costs & expenses as part of an accounting formula: "Revenue - Costs = Income from operations". Even if you were planning to stop paying it in 2020, where else would you list the fine?
The reason the stock is up so much. They're going to stop blowing money on stuff they aren't good at.
We need to solve this by requiring all repurchases to be with post tax money.
Capital gains are taxed at capital gains rate (almost always lower) and they gain can be offset by losses. This is the main advantage of stock buyback.
Edit: dlp211 points out the income from dividends is (generally) taxed at the same rate as long term capital gains.
The company has $10000 in after-tax profit that it would like to distribute, and you own 1 share. Since the money will be gone, the company will be worth $100,000 - $10,000 = $90,000 after the distribution.
- The company could pay a $100 per share dividend. You would get a $100 dividend but have to pay (say) 15% tax, so you now have $85 cash plus 1/100 of the company ($900), so $985.
- OR the company could buy back 10 shares. Now each share is worth $90,000 / 90 shares, or $1000. You don't pay any tax, your share is worth the same, but now you have 1/90 of the company instead of 1/100, so a greater share of future earnings.
In real life, the value of future earnings dominates the price (well, hope and greed do, but whatevs) rather than the cash-on-hand. The price should immediately go up once the buyback is announced to reflect that existing shareholders will get a bigger piece of the pie. That increase is not taxed until they sell, and the shareholder comes out ahead for the same cash distribution by the company.
I assume that if it's expected the company shares will go up in value due to the buyback, then they will have to pay a premium and buy the shares at a price that is close to the post-buyback share value.
So, perhaps at $1010/share.
However, I think there's no premium price equal to the post-buyback share price that they can pay to buy back shares that doesn't result in the company total value increasing as a whole from the buyback. This seems to be a contradiction.
I can only conclude that it isn't known that the buyback will raise share prices, because the loss of capital from the company should balance the increased fraction of future earnings that each share represents.
(edit: rewrote post after working through its logic).
If there weren't a separate capital gains rate, then the only difference would be the tax would be collected when the shares were sold rather than when the dividend was issued.
However, if you had the intention of reinvesting your dividend, then you would buy new stock with post-income-tax dollars, whereas a buyback would increase the value of your stock holdings without using your own post-tax money.
Who is usually getting unqualified dividends? Qualified dividends are taxed as capital gains.
https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...
Which is why accumulating funds are getting rather popular in Belgium...
Just to make things absolutely clear, I'll even happily make it explicit: I oppose it.
The super wealthy would just end up paying a bit more, but it's likely they'd remain super wealthy.
Also, given the eagerness of investors to gamble on unicorns, it's unclear that there is any shortage of investment money. Occasionally there's talk of a global savings glut.
I don't mean to impugn your political feelings. I consistently vote for people who will raise my taxes, personally. That doesn't mean I'm volunteering to pay more than I'm obligated within a system that doesn't provide the social services my family needs. I just want to point out that almost no one pays more taxes than they are legally obligated to, regardless of their political views. This implies that substantially everyone sees value in optimizing their taxes.
In light of that, surely you can understand why the question you asked does not make much sense? The law is what it is, so of course within the law people will attempt to pay less taxes.
Alphabet will have ad revenue for a long time, yes. But cloud will eventually be more important. So they need to make sure they catch up to MSFT and AMZN eventually. And the moonshots are very important as well. Their very nature is risk. If successful anyone of them could potentially be worth hundreds of billions. Morgan Stanley speculates that Waymo could be worth a quarter of trillion in 10 years. DeepmMind and Google Brain/AI are two of the leading AI entities in the world. Wing could be very important for Google Shopping. And they really need to build out their shopping offerings. And then there are the healthcare/life science efforts. No one even knows what Calico is doing exactly.
What they are missing is basically a space initiative. Yes there is loon and Access but Amazon is already in the process of launching their Starlink-like satellite network. And then there is Bezos's Blue Origin.
My (amateurish) prediction is to be positioned in: AI, biotech/genetic engineering, space industries.
That's great if you're, say, under the age of 50 and plan to hold your stock your entire life until retirement.
But consider a company whose stock price never went up but which had a great 50 year vision. Maybe towards the end of the 50 years it starts going up fast, but by then you already lived a big chunk of your life and passed many moments when you could have used some of the money.
At some point you're going to want ROI. One quarter is short for sure, but 50 years is the opposite extreme. Why wait such a long time for hypothetical ROI that may never come?
For Google specifically their problem is their revenue has way outpaced their ability to come up with new ideas. Since Larry Page stepped into the shadows the ambition and drive are gone. I'm not sure there's any vision, let alone a 50 year vision. The only highlights are their successes with AI, and maybe Waymo, but those are small parts of the overall company. AI mostly seems to be leading to incremental improvements in their existing products.
When you cast your eyes wider you see large amounts of what might uncharitably be described as self-indulgent waste. How many chat services are they up to now? And how many of them had any kind of interesting competitive advantage? How many languages and VMs without any obvious competitive advantage has Google created? How many internal systems do they rewrite without any clear idea of why, other than because someone needs to get promoted?
Dig around and discover just how many projects there are producing uncompetitive 'experimental' pseudo-products nobody has ever heard of and likely nobody ever will e.g.
https://nsynthsuper.withgoogle.com/
https://www.blog.google/outreach-initiatives/google-news-ini...
https://www.blog.google/outreach-initiatives/arts-culture/ex...
https://www.blog.google/products/photos/gallery-go/
Google has so many products they end up reusing their own names! Google Go is one thing, Google Gallery Go is a totally different thing - a mobile photo gallery app specifically for Nigeria, for some reason.
When you look at the firm closely you see a firehose of projects with zero business case and often near-zero impact. Why does Google think these things are better ways to invest the money than what other companies are doing?
Silicon Valley often sees "a firehose of startups with zero business case and often near-zero impact." And yet, it is considered a key driver of the economic growth / innovation / good jobs and places all over the world want to replicate its success. Maybe, Google just wants to have an in-house Silicon Valley?
At least, that's why I've been holding my shares. I was thinking of dumping them for better performing tech stocks, given the malaise I see there, but if they're finally starting to admit they may have run out of ideas and start returning money for reallocation elsewhere in the economy, then ... well ... maybe I'll hold a little longer.
Many companies will attempt to follow the rules, even if they think that the probability of getting fined is low.
Note that the 2 main arguments and counter arguments: it helps protect people's information vs it increases the barrier of entry are NOT exclusive. Both can be valid at the same time and I believe that in many regulations they are both valid. That's how life works, a chain of compromises.
So yes, taking on new and unknown (to the creator) legal liability from some regulation is a great reason to shut down a side project.
If you have time/money or plan to make money, GDPR compliance isn't terribly difficult. But free/cash-strapped service providers would probably think twice before becoming compliant (which is why a lot of local US news websites just don't allow European visitors -- compliance is somewhat expensive, and local news in the US isn't doing too great right now).
[1] https://developers.trello.com/docs/personal-data-storage
But regardless, the overhead-inducing parts of GDPR really kick in when a company grows past certain size (250 employees), at which point it should be perfectly capable of handling them. But more importantly, upstarts aren't some protected class. Just because an upstart can't compete against the incumbent without resorting to abuse of personal data, doesn't mean abuse of personal data should be allowed. GDPR protects regular citizens from collateral damage to their privacy caused by market competition. If incumbents can do a better job not abusing the data, maybe they should get the benefits.
(Also, it's adtech we're talking about. Personally I want neither the upstarts nor the incumbents to exist, and I couldn't care less who GDPR privileges here.)
Adtech powers the internet and lets 99% of the content exist. Let's avoid the endless conversations over it. If you want every company to be treated the same, then every industry should be too.
RE adtech, I don't think we can avoid this conversation as long as all the problems this industry is causing persist. And I don't want to have every industry treated the same. In my books, adtech is right there with selling hard drugs on street corners, and factories polluting rivers; I'm fine with getting rid of all of them. I do not want that industry to grow. As for the "99% of the content", I'd honest to god happily see it disappear. It's mostly garbage that wastes people time; in particular, mass-produced content marketing tends to have negative information value, making people wronger than they were before reading it.
> "adtech is right there with selling hard drugs on street corners, and factories polluting rivers"
Those aren't industries and the trillion-dollar market caps of advertising companies speak to commercial value. The world is more than just you, so you don't speak for everyone and your singular interests do not matter at all in this discussion and you use an adblocker or stay off the internet if you want.
I always take the time to have in-depth conversations about adtech here but you haven't said anything other than state an emotional position about what you want the world to be like. That leaves nothing to discuss.
We won't really know until they get taken to court over it.
https://www.searchenginejournal.com/google-is-delivering-les...
As the spending power of the average Internet user decreases, then CPC/CPM naturally falls with it.
Net income up >300%.
Most of the revenue and profit from ads.
Stepping back for a minute, political polarization has be increasing for about the length of time that Google has been in business. I'm not claiming Google is the cause, but rather that Google's tenure is a proxy for an acceleration in political polarization. [1]
Polarization enables outrage. Think Antifa vs. Proud Boys. Pelosi vs. Omar. AOC vs. ICE. Outrage reduces the amount of critical thought people put into the information they see and use to draw or reinforce conclusions they have about other groups, in particular, their polar opposites.
Outrage drives clicks, shares, likes and retweets. Clicks, shares, likes and retweets drive views, views drive ads, ads drive revenue.
Now, toss neural nets into the cycle. Neural nets do in fact learn and improve as feedback loops transpire.
Why wouldn't we expect these systems to learn that among other things, information that increases polarization results in the desired goal of increasing revenue, absent of any deliberate intervention by human beings?
[1] https://www.allsides.com/blog/political-polarization-america...
Google rise happened at the same time as digital media - both coinciding with rise of internet.
There was plenty of outrage going around on Fox and Rush Limbaugh talk radio before Google. Remember, Roger Ailes pretty much planned for a lot of this.
I think there's plenty other explanations for the current political climate. It has perhaps moreso to do with how the media was previously controlled by small number of big players versus the many smaller players we have today with more extreme views.
This is all well and good, but revenue is not an input to most machine learning algorithms at Google. First off, there is a pretty serious firewall between search and ads, so any organic results will be completely oblivious to revenue. Search systems literally do not have access to that kind of information. Even within ads, the concept makes sense only if you don't think about it too much. The big money-maker ads are when someone is trying to buy something. Ads around viral content are just not something that people can pay much for, because the margins in the news business are very thin.
Now if you want to make an article that the media has learned that spectacle and outrage drive clicks, I am here for it. (But this has always been true. Yellow journalism was a thing more than a century ago.) And I guess you can make an argument that Google facilitates this by pointing you to the media, and by participating in the feedback loop. But I don't think Google revenue is as causally linked to outrage as you seem to believe. After all, correlation usually doesn't indicate causation.
Is this a joke? If you allow Social Justice Warrior like Jen Gennai to edit search results you are going to trigger people.
Neural network is bias because of the data. It's always the data. gfycat has an article about this. They have a huge user base that's into kpop and their training dataset didn't have much Asian people in it so it kept on identifying kpop star as women.
Studies have documented that if you let YouTube auto play for a while, the videos would becomes increasingly more radical.
https://www.google.com/search?q=youtube+recommendations+more...
If the algorithm actually does suggest more and more radical videos I wonder if it's a case of reverse causation - the algorithm suggests a more radical video because it learns what people actually want to do and choose to do, which is watch the most outrageous and/or bloodcurdling video out of the options presented to them?
YouTube recommendations used to go towards more popular, meaning all playtime eventually went to Gangnam Style. So they went the other direction, and gave more view time to radical/fringe YouTubers, which they're getting flak for.
They actually do!
Doesn't help with autoplay, but adblock lists to get rid of recommendations on YouTube: https://youtube.adblockplus.me/
Almost a Billion dollars per quarter!? Put them out of shareholders' misery, already!
For the past 6 or 7 years people have been predicting that Google's growth would soon slow because:
(a) The number of ads on a search result page had reached saturation point
(b) The percentage of people using the internet in rich countries had reached saturation point
Although real, these effects have proved to be outweighed by other, less limited factors of growth; in particular Google's ability improve the quality of match between advertiser and user. Even now I think there is significant room for Google to improve this matching - eg. when I put an iPad Pro in my online shopping basket at apple.com but don't buy it, why don't I then see iPad ads on YouTube? When I give Tesla $1,000 to reserve but not buy a Model 3, why don't I then see Model 3 ads reading The New York Times? Apple and Tesla are leaving money on the table, and when they wake up Google will make even more money.
In fact, Tesla can use your email address on a negative audience list when advertising on display networks that hit publishers like NYT. I wouldn't be surprised if Tesla was doing this to optimize their ad spend.
For purchases where you are retargeted, that's because when you buy something, you're a magnitude more likely to purchase it again (i.e. as a gift, have a backup/travel one, etc.). Goods like automobiles are an exception here, unless you're in the business of buying multiple cars in the same month.