Antitrust penalties will eclipse Alphabet’s strong cloud performance unless it can comply with regulation, says GlobalData

Following the release of Alphabet’s Q3 2022 earnings;

Suneet Muru, Analyst at Thematic Intelligence Team at GlobalData, a leading data and analytics company, offers his view:

“Alphabet’s underperformance in Q3 2022 shows that it must continue to shift its primary revenue stream from advertising to cloud.

“The fast-growing Google Cloud Platform (GCP) remains a key business segment. Recent extensions in its cloud ecosystem will positively impact data sovereignty and help GCP close in on Amazon Web Services and Microsoft Azure. However, antitrust penalties will shift the focus from the technology itself to regulatory compliance. Therefore, Alphabet must also be comprehensive when outlining regulatory compliance to ensure increased cloud investments do not end up as attempts to water a dead plant.

“Antitrust has far-reaching implications for the way user information is collected and handled and will thus be a crucial theme for Big Tech in 2023. Alphabet must also re-assess its approach to data privacy following the recent $161 million penalty from Indian authorities and delays in scrapping third-party cookies. While the new ‘My Ads Centre’ promises users control and peace of mind regarding the handling of their personal data, Alphabet must create a focused, time-sensitive initiative to gain customer trust in the long run.

“Alphabet is well equipped to repurpose discretionary spending towards YouTube Shorts following reports of cutbacks for Area 120—its in-house engine for new ideas and projects. With TikTok’s popularity showing no signs of waning, the development of the short-form video platform is essential for YouTube to stay competitive. The imminent monetization of YouTube Shorts will be an attempt to draw creators away from TikTok, but it will help Alphabet to expand the adoption of the platform.”

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