Google Roundup: Earnings, Gmail Update, Russia, GDPR, India

Alphabet’s (NASDAQ:GOOGL) first-quarter earnings, its blocking by Russian authorities, GDPR related trouble in Europe and India initiatives were the top news from last week. So taking it one at a time, first up is earnings-

Earnings

Alphabet’s reported revenue of $25.0 billion was 2.7% ahead of the Zacks Consensus Estimate of $24.2 billion, while its reported earnings of $9.93 beat the Zacks Consensus Estimate of $9.21 by 7.8%. Despite the solid results, shares sold off following the print as investors worried about Google’s rising costs. Read more: Alphabet’s Costs Up: Not Unusual For A Growth Stock

The regulatory overhang is significant for Google, and even more so than other advertising-dependent tech players like Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) because not only is Google on the hook for privacy concerns and tax avoidance but also for anti-competitive behavior. Moreover, it isn’t just the EU but governments all over the world that are scrutinizing Google’s business practices on these grounds.

Rethinks Gmail

Google is fortifying Gmail with AI as part of its most comprehensive update to date. The new Gmail will be gradually rolled out to all users over the next six months or so once they opt in to the service.

With the update, Google is making inbox more intuitive with hover options that users can select to minimize the number of times they need to click. It’s also adding a feature that will surface content in attachments, so you can quickly select the picture or file you are looking for. Hovering over an email also displays archiving, deleting, marking as unread and snoozing options, to facilitate quick action. Google will also “nudge” you if there’s an important email you’ve omitted reading or replying to.

Tasks, Calendar and Keep are accessed through icons on a right-side pane, again facilitating quick actions while on the job.

Google also added a security feature that while interesting, would probably be better appreciated by lawmakers, espionage operations or law breakers. The rest of us don’t need to prevent people from downloading attachments (especially since you can take a screenshot anyway) or have emails disappearing after a day, week or month, depending on the sender’s choice. Individuals rather than companies might like this feature though.

Overall, Google will officially guzzle the data in your email to help you greatly with routine email functions, if you grant it permission.

Blocked In Russia

Russia has intensified measures to stop the Telegram messaging app after its creator defied an order to shut down. What the Russian communications watchdog Roskomnadzor (RKN) objects to is the fact that Telegram enables encrypted messaging and refuses to share the encryption key with the government, so communications remain private.

Telegram, like Zello before it, uses a technology to hop to another IP address when the one it’s using is blocked. But the authorities have prior experience with Zello, so this time, they quickly blocked 18 networks that are used by Amazon (NASDAQ:AMZN), Google and other host sites linked to Telegram.

Google has now admitted to TechCrunch that some of its users are unable to access Google services and that it is investigating the matter. Amazon hasn’t responded to a request for comment.

Impact of EU Privacy Rules

Publishers aren’t too happy with Google’s solution to GDPR and four publisher trade groups (Digital Content Next, European Publishers Council, News Media Alliance and News Media Association), representing 4,000 newspapers and media companies, primarily in Europe and North America, including Axel Springer, Telegraph Media Group, New York Times, Associated Press and Thomson Reuters have voiced their opinions through a letter seen by Reuters.

The problem lies in Google requiring publishers to obtain consent from users because of their direct access to them while it plays the role of controller, i.e. the party that gets to use the data for ad targeting.

Publishers are concerned that this puts them in the position of acting as Google’s agent (processors under GDPR law), which then puts Google in the driver’s seat, laying out what those consent requests will look like.

It could also prevent them from using rival ad services if Google’s consent forms don’t provide for them.

Publishers are also concerned that because Google wants them to collect explicit permission in all cases, the GDPR clause that provides for use without consent for things like combating account fraud or measuring marketing efforts will also be disallowed by Google.

Moreover, they fear that this will expose them to hefty fines for wrong doing by Google or its advertising partners.

A Google spokeswoman said that Google is a controller under GDPR “because we make decisions on data processing to help publishers optimize ad revenue.” She maintains that its controller designation does not however give it any additional rights to data.

There is a provision in the GDPR that allows for joint controllers when more than one party is responsible for processing data. Their individual responsibility is then determined by agreement between them and shared with data subjects that are also provided with a single point of contact for communication with them. We don’t know if this is what the publishers want, but the whole process looks highly complicated.

Since there is no precedent, it’s hard to understand the exact impact of GDPR and there is a lot of confusion about how the law will be implemented. Most important, there is a danger that smaller networks without the resources to see things through will be pushed out of business giving further monopoly to the market leaders.

Mentoring Indian Startups

Google India has, through its India-only developer team Launchpad, selected 10 Indian startups at a four-day boot camp under its “Solve for India” program. Launchpad’s program is focused on nurturing Indian startups in machine learning and artificial intelligence so they can develop AI-based solutions across functions like agriculture, payments and retail. In the first phase, it added Nebulaa, Slang Labs, PregBuddy, LegalDesk, PaySack, Vokal, FarMart, Meesho, Pratilipi and M-Indicator, and many more will be added going forward.

The payback for Google isn’t clear yet, but it could range from the acquisition of key intellectual property on the cheap to government favors in expansion plans.

Recommendations

Alphabet shares carry a Zacks Rank #3 (Hold). Buy-ranked Internet stocks you could invest in instead are Autohome (NYSE:ATHM) , Match Group (NASDAQ:MTCH) , Etsy (NASDAQ:ETSY) and Internap Corp. (NASDAQ:INAP) . Or take a look at the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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