Thirdquarter Profit Guidance also a miss. Up in smoke. Jules defense of its marketing policy goes proof. The company is grilled by lawmakers in washington who say more teens are getting hooked. First to our top story, a tale of two earnings as amazon and alphabet report secondquarter results. Shares of the Parent Company jumping while amazon is heading in a different direction. Alphabet reported revenue that beat the highest estimates, calling concerns of slowing growth at the heart of the largest digital ad company. Sales in the cloud unit grew by 37 , but not enough to top estimates. Joining us to discuss you cover alphabet and amazon, so what is happening here . Alphabet was such a bad q1, that it was easy to step back from the disaster they had. They put a great number up. An additional 25 billion. This is one of the cheapest largecap tech names we cover. It was the worst sentiment going in of any techmeme we cover. It is definitely the least transParent Company, so given the q1 blitz, this is a rebound. I am not sure investors will treat this as a sustainable recovery. I think there are other names that investors will try. Stock is lagging today. It see them step up and put it back in the buyback, which they have been slow relative to other tech companies. Emily shares were up 9 this year. Before this Earnings Report, lagging peers. I got off the phone with alphabets ceo talking about the growth drivers. She said they have been focused on investing to support growth and said there was real strength in the other income and expenses line item, which we saw go up to 3 billion, including capital and gv. That is the first time i have heard her mention or refer to investment in new uber and lyft, which both went public. Talk to us about the overall story. Ad Revenue Growth did increase 16 compared to 15 in other quarters. Is this a new normal. I think it is. The good news for google is that they were able to stop the decelerating ad revenue for the first time in a year. They were able to increase that a little bit. I think the story remains from last quarter, which is that the Digital Advertising ecosystem is more competitive today than it was even a year ago. Obviously facebook and amazon being the new entrant as the thirdlargest to dull Advertising Company out there for advertisers to put their dollars into. There is more copper tissue and and that is feeding this new normal that we are going to expect going forward. Emily talk about the Bigger Picture as these Companies Face antitrust scrutiny, the doj has opened an investigation. The ftc has opened a review into facebook. How is this antitrust scrutiny going to impact the bottom line . When you look at what happened to facebook a year ago and how the market reacted to some questions around whether the Regulatory Environment was going to hit their bottom line, the top line was going to float to the bottom line like it used to, we saw the stock get hit, then the name has surged. The same thing happened to google last quarter. It was partially because investors were worried about the youtube algorithm, the tweaks they were doing, and this quarter, we saw that it is not going to have a longterm impact. You will see the stock in the after hours surge. The other aspect is, google has a history for the antitrust reason of being able to ratchet up and down its growth as it wishes. This is not a surprise that they blew the numbers out of the water. It looks like some of that is from the other parts business, but the basic ad revenue business is incredibly strong. Cost per click numbers were strong. They came in above estimized consensus. Some of the other internal numbers were a little bit weaker, but overall, they have the ability to turn the knob at will each quarter and they will be able to do that going forward. Emily there were concerns about youtube because of all the scrutiny. They have changed algorithms, changed policies around hate speech, but youtube is still the second largest driver of revenue. In talking about antitrust, what she said is that the doj review would be quite broad, and she talked about how we have been engaged with regulators around the globe for quite some time. There are areas where we are clear we support changes. She indicated that this is googles normal state of play, to be under pressure, to be dealing with regulators. It is not a distraction. How worried are you for whether it is google or amazon or facebook about this regulatory pressure. As you said, they have been here for a long time. The way i look at this is all three of them are going to have to deal with this going forward, but if you think deeply about the ability of our legislature to actually put any real legislation on the board that is going to matter, it just wont. It will pressure all three companies at the margins to make small changes that could have a decent impact positively in a social way, but you are not going to see them break up facebook, crush amazons dominance in the retail space, and you are not going to see them do anything to google that will have a massive impact from a regulatory standpoint. The pressure is warranted. These companies deserve to be under pressure. They are huge and there is no reason why they should go without oversight. Emily do you agree . Microsoft is a 30 stock when eu was investing them. It is now 40. This is total noise and the reality is, it is effectively broad reaching across all tech. The government is doing what they should do to protect us. It is like any other aspect of life. We think we do the right things for our clients. It does not mean that they are wrong. Being big is not bad. Being bad is bad. We dont think anything is going to come out of it and this is great, because these stocks have been pressured. I travel globally and the number one question is software has it multiple turns higher. We have very strong views of the big platforms in internet of great buys at this level. Emily what . What are the headwinds in your view . When you look at Digital Advertising market, it is just growing. The pie is growing as amazon is bringing in dollars from offline advertising. You have cpgs who have traditionally spent a bulk of their money in instore placement, whether shelf space or inside the retailer, bringing that onto amazon, facebook obviously growing as well and google is, too. The only problem is that google is losing shares. They are not losing share at an enormous pace. It is really the competition that is going to be the biggest problem for google going forward. Amazon is creating a really interesting ecosystem. If you look at those Shopper Marketing dollars coming online, that means that retailers like walmart and target and kroger, some of the largest retailers are scrambling to figure out how to make a selfserve add platform like amazon. Now, google and facebook are going to have to compete against retailers. I am a believer in pinterest. They have not had a huge success story, but amazon might pave the path for them to get to this game in a more substantial and real way. Emily pinterest did have a pretty big ipo. If that is not success, i dont know what is. You are going to stick with me, brett, i know you need to get on some calls, so i will let you go. Shares of tesla plunged thursday after the electric car posted a worse than expected loss and another Major Management change cast more doubts on itfuture. The cofounder is leaving the job. He has been with the Company Since before elon musk joined the board 15 years ago. Coming up, alphabet shares advance in trading after sales and profit beat estimates. We are going to dig further into the highlights, listening to the call, we will bring you more headlines as we have them. This is bloomberg. Google is having a bounce quarter that saul revenue top estimates. Shares from its own Online Properties climbed 18 to more than 27 billion. Last quarter, shares plunged. This time around, shares are feeling the love. With us to discuss, colin coburn, analyst at Forrester Research and lee drug and. I want to zero in on the cloud, because google cloud has been in third place for a long time, though the entire cloud pie is growing. They have made a change, replaced diane greene. What are you expecting when it comes to google cloud and how important is it going to be for the business, given that they have not been able to meet market share . It is still important business. It is not the core, but it is an important way for google to diversify their business. If you look at the way that google gets revenue, 85 is coming from the ad business. Given the competition they are facing, i dont think you want to be in a spot where you have north of 80 of your revenue coming from advertising. They are going to place a bigger emphasis on the Cloud Business. How much success are they going to have . It is hard to say. They have not been able to get out of that third slot. They are facing massive competition against microsoft and amazon, who have had success and who put significant dollars behind that business. It will be hard to get out of that slot, but still a significant part of their business that they will be focusing on. Emily you wonder if acquisitions will be part of the story. They did by earlier this year and i asked if acquisitions in the cloud would make sense. She said we are open to acquisitions. There is a lot we are doing organically and we are excited about the opportunities. At the same time, she said the organic business is doing well, but, given the antitrust scrutiny, google might hesitate to do more acquisitions in the near future. Is that what you would expect . I think the Cloud Business is important strategically. Look at what microsoft did with open ai investing 1 billion in i dont even know what you would call it. It is a company, but kind of a nonprofit. I think google will look at their Cloud Business in a similar fashion, where the technologies of the future that will be scaled out, Cloud Business is going to be important. It is in a sense a platform for new businesses. While amazon will continue to push that Cloud Business to the bottom line, and as we have seen today, it is incredibly important to the stock price, because it impacts so heavily in the bottom line numbers, for google, i dont see it that way. I see it even more strategic to google the and it may be to amazon. Emily open ai, and Artificial Intelligence research company, lets talk about youtube. It has been questions about how youtube can continue to grow. It is one of the centerpieces of scrutiny from lawmakers around the world. Focusing on misinformation, fake news. Youtube has made a lot changes we have done reporting on internal turmoil under google. Very positive about growth on the call. She echoed some of the things she said on the Earnings Call with analysts. How do you expect youtube to weather these headwinds . The brand safety issues that advertisers have are legitimate. It has been something on their spotlight for a while. Google hasnt found a more automated way to figure out how to monitor for those sort of things, it is a manual, laborious process, just using resources to monitor it. In terms of headwinds when it comes to youtube, i am not concerned. When you think about googles package, last year, a big innovation was bringing all of their advertising platforms into the google marketing platform. A more comprehensive stack to offer to advertisers. The thing that is great about the way they did this is that google is able to offer a full Customer Lifecycle offer, unlike anyone else is able to do. Facebook is stuck in this early awareness phase, where if you are trying to bring awareness about the product or service you are selling, facebook is a good place, but if you are looking to convert customers right now, facebook is not so great. Google is great for both. Youtube is great for awareness, because people consume more video content today and they did five years ago. There will be 8 growth in video consumption by u. S. Users. Emily good to hear your perspective. Thank you both. We will continue to monitor the call and bring you any additional headlines. Coming up, she calls herself a hardcore tennessee conservative. Marsha blackburn, we will hear from her next. This is bloomberg. Emily back to our continued look of how the u. S. Government is regulating big tech. The government has announced it is opening a broad antitrust investigation. Marsha blackburn has the tech task force and spoke with david westin about whether big tech has gotten too big. This is a Bipartisan Group open to every member of the Senate Judiciary committee. The chairman said we need to make certain everybody has got the Institutional Knowledge and we are all on the same page. As we began to look at all the different assets with privacy and Data Security and antitrust and competition and transparency and censorship and prioritization, all of those online issues that affect everyone as they have moved more of their transactional life online. As companies have set up platforms that allow consumers in that relationship to have more of that functionality online. We got the task force started last week. It is bipartisan. Our first topic was privacy and we have the global privacy leaders from snap, match, salesforce and mozilla come before us and lay out how they are approaching privacy and talk with us about how they would see a privacy structure. We talked about some of their vulnerabilities and some of their successes. It has not always been clear to me that big tech was paying attention to capitol hill. Have you finally gotten their attention . We had facebook earnings and in the Earnings Call, they said they would take down Revenue Growth projections, because of the possibility of competition. Do you have a sense that they are listening to you . Yes. We have been working on this issue for seven years, when we did the working group in the house at the energy and Commerce Committee. I led that also. Here is what i think has happened. The american public, the Online Public has realized that when they are on all of these social media apps, they are the product, because these apps and these interfaces are data mining you, whether it is youtube or facebook or google, the revenue stream for them is in your data and these companies, these social media platforms are big advertising companies, because they sell your data to third parties and you dont know that they are benefiting from your data, the better or more highquality the data is, the more money they make. I read in the paper today about some people in washington talking about big social Media Companies to pay for the data. Pay those of us on facebook or twitter or google. Is that a serious possibility . This is something that has been batted around for a while. The companies say, we are giving you a free service, so we are not going to pay for your data, but here is why privacy is so important. You need to give the consumer the ability to opt in to protection for their personally identifying information, their sensitive information, and let them opt in if they want you to share that with a third party. You need to give them the ability to opt out and prohibit you from sharing your nonsensitive information, which is many times transactions or searching that they are doing online. That would change a Business Model of the social media platforms. Finally, give us a sense of the timeline if you can. We have the apartment of justice starting an investigation and your task force. Which will give us results sooner . We are going to be giving you results on a rolling basis. It is highly possible that this fall, we are going to see privacy legislation move forward. My browser act, which puts in place one set of rules for the ecosystem, opt in opt out. It is bipartisan and we are going to have judiciary committee, Commerce Committee looking at these issues. I think you will see something soon. Emily tennessee senator marsha blackburn. Coming up, amazon falling after hours largely on a profit. Analysts worried the company will return to a big spending cycle to expand sameday delivery. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Emily this is bloomberg tech. Back to our top stories this hour. Amazon profit fell short of forecasts under continued efforts to shorten delivery times. Most analysts advise clients to buy into amazon. Does this all have to do with the continued investment in shortening delivery times, warehouses, logistics, etc. . I think that is a big art of it. Obviously, they talked about the 800 million commitment, so i knew that would weigh on earnings, but i think aws is a bigger story. We saw that decline to 37 growth. First time we saw that dip below 40 and given how much that contributes to operating profit is potentially a canary in the coal mine. Aws numbers were low, but you are forgetting how good revenue numbers were. With aws margins actually coming in a little bit weaker, that is one concern. Is it because of international expansion, or is this competition . We think it is more about the expansion part. Marketing costs really jumped quite a bit this quarter. The highest we have seen in a good seven years, really. They give you a breakdown of advertising portion, but not in the quarterly findings. Amazon spends more than 8 billion. They spent more than 8 billion less year in advertising and promotional activities, but that growth is something to think about