Google's parent company Alphabet Inc. announced its financial results for the first quarter of 2016, which show that losses from Other Bets businesses have increased to $802 million, as opposed to $633 million in the previous year.
These businesses include autonomous cars, home automation products Nest, Google Fiber and its experimental technology lab dubbed X. Not so long ago, we have seen Alphabet X showcased its bipedal robot that has the ability to climb stairs and overcome hurdles.
Google's Other Bets companies, though, have contributed $166 million in revenue. However, the results failed to hit Wall Street targets.
In the period ending on March 31, Alphabet collected $20.26 billion in revenue, or $7.50 per share. In some way, Wall Street was expecting to see extra cents, $7.97 based on $20.37 billion in revenue, according to data compiled by Reuters.
Spending more money in building traffic for the company's mobile advertising services is deemed as among the reasons why Alphabet missed Wall Street targets.
Payments to other websites, known as traffic acquisition costs (TAC), reached $3.8 billion and accounted for 21 percent of advertising revenues, Alphabet's Chief Financial Officer Ruth Porat said during a press conference. The percentage of ad revenues Alphabet used up on TAC also showed an annual increase by 13 percent.
Sameet Sinha, analyst at B. Riley & Co., said that investors must have to get used seeing the increased TAC. For Sinha, this is the "cost of doing business."
"If you're getting mobile searches from Apple devices, you have to pay Apple for traffic so that revenue can happen," explained the analyst.
Porat added that the practice of spending more money to drive traffic is likely to go up as the shift to mobile carries on.
While Alphabet is a little under what investors were expecting, Porat said the first quarter results signify a "tremendous start to the year" with 23 percent growth in constant currency and 17 percent increase in revenues year-on-year.
"We're thoughtfully pursuing big bets and building exciting new technologies, in Google and our Other Bets, that position us well for long term growth," she said.
