Google’s iPhone Search Dilemma
Alphabet recently reported outstanding Q1 results with virtually all key financial metrics pointing in a positive direction. But one item caught my attention: the increase in Traffic Acquisition Cost (TAC) for Google distribution partners otherwise known as Sites TAC. In Q1 Sites TAC was 10.4% of site revenue, up from 8.5% in the prior year period. This isn’t a one time blip, but a continuation of a long term trend and it is disturbing on two counts: 1) it equates to lower profit margins and 2) it means Google’s financial engine is increasingly reliant on iPhone generated search traffic.