What's going on?

On Thursday, Alphabet (the parent company of Google) reported less profit than expected for the first quarter of 2016 and disappointed investors sent the stock down about 5%.

What does this mean?

�Search and advertising� (i.e. the business known as Google) still makes up the vast majority of Alphabet�s revenues. One of Google�s problems is that it�s making less money every time you click on one of their ads � in fact, income per click fell by 9% which was quite a bit more than the 6% that investors were expecting (a 3% difference is fairly substantial when you�re dealing with billions of dollars). There was nothing disastrous in the numbers, but investors had got used to Alphabet really wowing them: Google�s dominance in online advertising has helped push the stock up more than 40% in the past year. So, when it doesn�t shoot the lights out, people get disappointed and tend to sell the stock.

Why should I care?

For the stock: The long-term story hasn�t really changed � but Facebook is a threat. According to some, we�re going to consume all of our media online in future years and all advertising will be highly targeted at us. However, even if one buys this argument, Google isn�t the only ad player out there: Facebook�s digital advertising business is booming and has emerged as a strong competitor to Google.

The bigger picture: Quite a few companies disappointed investors on Thursday. Both Microsoft and Starbucks also saw their stocks fall by about 4%. One reason this is interesting is that US stocks are approaching their all-time highest level and it�s not going to be easy to �break-through� that barrier (yes, stock markets have barriers – they�re psychological as much as anything else). Arguably, some notably good news is going to have to come from a number of companies before investors will feel comfortable enough to continue to buy stocks at this, historically, high level.