The Rising Influence of Rising Affluence

[DewDiligence]

GOOGL’s “traffic-acquisition” costs are rising faster than ad revenue; what are the long-term implications for the business model?

https://www.wsj.com/articles/traffic-costs-jam-up-google-1500935189

Google showed an unprecedented ability to generate economic activity out of its massive internet search engine. Paid clicks, which measure the frequency that Google users click on advertisements, surged 52% year over year. That is the biggest jump in at least seven years—notable considering the company’s advertising revenue base has grown nearly fourfold in that time.

But that growth comes with a cost—$5.1 billion in this case. That is what Google expended for the quarter in traffic acquisition costs, which was also a record high. More important, traffic acquisition costs, which rose 28% in the second quarter compared with last year, outpaced revenue growth…