Some Investors Worry Over Google’s Traffic Acquisition Costs

October 12, 2017 - Written By Daniel Golightly

Google’s rising traffic acquisition costs have some investors worried about Google’s shares, according to a new report from Bloomberg. Other investors are, of course, less concerned with the impact of the fees, which are paid out by the search giant in order to give Google ads better placement. However, that doesn’t mean that those investors aren’t still paying very close attention. That’s because the current the annual amount paid out for traffic acquisition is recorded to be around $19 billion and the cost has been going up, in particular with regard to how much of that money is going both to Google’s rivals and partners. More specifically, the company’s partners are estimated to be receiving approximately $7.2 billion, while Apple is estimated to gain around $3 to $4 billion of that total amount. The concern is that, if the growth gets out of hand, it could hold the company back.

The huge sums of money in question here don’t only arise from advertising costs either. Google is not only paying out to the manufacturers responsible for creating Android-powered devices and to ensure that those devices contain all of the Google apps they do right out of the box. It is also paying Apple to keep Google Search available in that company’s Safari browser for its iOS devices and Mac Computers. Worse, the risks associated with the increasing costs to the company are affected by other factors, such as recent anti-trust rulings against the search giant and other rulings that have forced the company to back off of its own search engine on mobile devices in some regions of the world. That is highlighted by one particular case in Russia, where the company is compelled to allow Yandex as a secondary option in its own Chrome browser for Android devices. Effectively, Google Search will no longer be set as Chrome’s default search engine. That other organization’s share prices have climbed rapidly as a result – by around 43 percent. It isn’t inconceivable to predict that, in combination with news of those other regulatory rulings, could make it more difficult for Google to negotiate its costs and terms in the wider technology industry.

It’s important to note here that other investment firms, such as the prominent financial firm Baird, do not see any of this as being a huge problem in the long run. They point to the fact that a large portion of the recent increases has been the result of revisions to Google’s contracts with Apple. In fact, they predict that the increases will begin to level off to a more normative rate as early as late 2017 to early 2018. So the issues Google is facing are not necessarily going to be the company’s downfall. Moreover, the company has been revealing a steady stream of both new devices and new services or products over the past several months. Those should, at very least, help to bolster the company’s finances against its rising traffic acquisition costs.