Profits are up 73 per cent, revenue was up 26 per cent. So why are analysts talking about Google’s parent company, Alphabet, playing catch-up? Why is there this sense that the company is too confident on how new privacy rules will affect it? Larry Page, Alphabet’s CEO once talked about the company’s long-term aim as being able to know what products or information people want before they do? That’s AI and big data for you. One day, in the not too distant future, it will know you better than your friends do, maybe better than your partner or mum. Maybe better than you know yourself. At least that is what we are told. New privacy laws may change all that. GDPR, for example -the General Data Protection Regulation, and enforceable from May 25th - sets out six legal ways in which a company can process data. But for marketing companies, and the likes of Google, there are two legal bases that really matter: consent and legitimate interests. The second of those bases, may feel like a ‘get out jail card’, but it isn’t - the rules are very strict. But the new e-Privacy regulation, sometimes known as the Cookie Law, will radically change the way websites can use cookies, having an annoying pop-up asking for permission will no longer cut the mustard. Websites will need users to proactively give consent. Google Chief Executive Officer, Sundar Pichai said: “GDPR is a fairly new public topic, but for us it is not new - we started working on it 18 months ago. "We are working very closely with our publishers and our partners… It is a big effort, we are very committed to it and to getting it right." But then he said something astonishing: “It's important to understand that most of our ad business is search, where we rely on very limited information, essentially what is in the keywords to show a relevant ad." Of course, he is right, well he is the boss, you would expect him to know. If someone types ‘organic sausages’into Google, you don’t need the benefit of AI to know they may be interested in buying some. Google does not need personal data to know ads for organic sausages might do well if they appear when organic sausages are typed into Google. But is Mr Pichai really saying that this type of advertising is all that really matters? That all that clever AI the company has been working on does not help boost revenue? Profits at the company hit $9.4 billion. But this is a company with a market value of $741 billion - assuming the latest quarter at the company will be repeated in the next three quarters, that means its valuation is around 21 times likely annual profits. That is not a massive P/E ratio, but to justify it the company must keep growing. It can’t do that on the back of key-word advertising alone. In fact, profits and revenue were not the only things to increase during the company’s latest quarter. Investment was up too, with capital expenditure tripling to $7.7 billion. The extra money is going on Cloud and consumer device businesses, as the company tries to close the gap with Amazon and Microsoft. One thing is for sure, once the e-Privacy regulation arrives, radically changing what companies can and can not do with cookies, it will need all that extra diversification.

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