Google says it’s ‘rethinking everything’ around machine learning

23 Oct 2015 | Author: | No comments yet »

Google says it’s ‘rethinking everything’ around machine learning.

It’s already sorting your email and translating your voice searches, and machine learning will play a bigger role in Google’s services moving forward.San Francisco – Alphabet, the new holding company for Google, introduced its first share buyback and beat Wall Street’s profit forecast on Thursday, helped by solid progress in mobile and video advertising, sending the stock to its highest-ever level in after-hours trading.SAN FRANCISCO: Ever since Google went public 11 years ago, investors have regarded it as a wildly successful company that made no secret of its distaste for Wall Street. Revenue and profit well above analysts’ average forecasts, along with the unexpected buyback, was welcomed by Wall Street, which is now betting on further growth. “They’re in a great position in the overall advertising space, whether it’s search, display or mobile,” said Kerry Rice, a Needham & Co analyst. “They’ve got the right program to continue to grow at a solid pace and be dominant in those spaces.” The results come at a pivotal time for the company as it navigates the transition from desktop to mobile, where ads are generally less profitable, while facing growing competition from rivals like Facebook Inc.

In its third-quarter earnings call on Thursday, Google, now called Alphabet, reported strong growth, but with a closer eye on expenses, and announced that it would give investors some of their money back by buying back shares of its own stock. New Google CEO Sundar Pichai took part in his first earnings call, and in between discussing the numbers he revealed how important Google thinks machine learning is to its future. At the same time, it is moving into a new corporate structure that will put more visibility on parts of Alphabet such as its secretive research arm, Google X.

Company executives touted strength in mobile search for the strong results. “Search traffic on mobile phones have now surpassed desktop traffic worldwide,” said Sundar Pichai, chief executive of Google Inc. A common example is its use in email, where machine learning figures out from watching users’ behavior which emails are spam and which should be let through.

Starting next year it will separate the financial results of Google’s traditional search and advertising businesses from a dizzying number of appendages including, among other things, a pharmaceutical company, two venture capital arms and a project to build self-driving cars. At Google, it’s long been used for voice search and language translation, and Pichai said the technology has progressed quickly, particularly in the past two years. ”Our investments in machine learning and artificial intelligence are a priority for us,” he said.

At that level, the company’s market value would be around $500 billion, making it the second-most valuable company in the S&P 500 after Apple Inc . “They seem to have a better hold on mobile and are navigating the transition to mobile usage better than expected,” said James Cakmak, an analyst at Monness, Crespi, Hardt & Co. Still, Cakmak questioned how Google’s internet-based business will fare in the long term in an app-based world. “Their primary strength in apps is YouTube and that’s pretty much it,” he said. Investors have been pressing the company to return more of its $72 billion cash pile, but the announcement that Alphabet would buy back up to $5.09 billion of its Class C shares came as a surprise. Thursday was the first time Google’s results were reported by Alphabet, the holding company it formed earlier this year, of which Google is just one part. Typical of a company filled with engineers, the buyback was encased in a riddle, with an exact value of $5,099,019,513.59 — which mirrors the square root of 26, as in the 26 letters of the alphabet.

Expenses rose 9.1 percent to $13.97 billion but were 74.7 percent of total revenue, compared to 77.4 percent in the same quarter last year, reflecting new Chief Financial Officer Ruth Porat’s tight rein on spending. “It’s strong top and bottom line results,” said BGC Partners analyst Colin Gillis. “It’s great to see not only expense control – which is the new CFO – but also upside on the top line.” The company said the number of paid clicks, in which advertisers pay only if a user clicks on the ad, rose 23 percent, compared to an 18 percent increase in the previous quarter. “Our value proposition to markets of all sizes is simple. The price of Google shares, which trade under the name Alphabet Inc. but still have the GOOG ticker symbol, are up close to 25 percent this year, in part because investors think Google’s core business will look a lot more impressive once the company breaks off the money-losing projects. Alphabet has deftly positioned itself at the center of every major computing trend, including mobile phones, online video and the Internet-connected home, like the thermostats made by the company’s Nest Labs unit. The company continues to generate tens of billions of dollars a year from its original desktop search business and owns the world’s largest mobile operating system, Android. The Google Play Store, where Android users buy games and mobile applications, generates billions in revenue, while the YouTube video site is poised to grab advertising dollars from television.

Revenue from YouTube also grew at a “significant rate,” she said, and Google’s programmatic advertising business—real-time, automated purchasing of ads—was strong. Speaking of Google’s cloud services for businesses, which compete with Microsoft Azure and Amazon Web Services, Pichai said Google is “investing a lot and playing for the long term” Not all was rosy, though. Aggregate paid clicks—the number of times Google made money when a user clicked on an advertisement—increased 23 percent from a year earlier, but the amount of money Google received for each click dropped by 11 percent, continuing a downward trend from the past several quarters.

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