If there was a survival guide for technology companies in 2016 – one rule would be to never get in the way of Google’s parent company Alphabet (GOOGL). Just ask investors in Bankrate. Shares of Bankrate, a well-regarded provider of news and information about interest rates and credit cards, dropped nearly in half Thursday to $6.85. Late Wednesday the company reported quarterly revenue of $93.4 million – which fell short of expectations by 30%, says S&P Global Market Intelligence. The company also posted a quarterly net loss of $13.3 million. More concerning, the company declined to provide an outlook for 2016.
What’s the problem? In a word: Google. Last year, the online advertising giant launched a pilot of its own financial services comparison engine, called Compare, that took on Bankrate directly. The “Google Compare product test did dampen our overall (credit) cards growth and revenue profitability in the quarter,” says Bankrate’s CEO Kenneth Esterow in the conference call. Google has said it will end its Compare service, including Compare Credit Cards, by March 23. That might seem like good news for Bankrate. But the fact is, Google is also “displaying additional paid ads on the top of many search results,” Esterow says in the earnings press release, which puts Bankrate in a tough spot going forward.
Bankrate’s woes underscore the difficulty of building a meaningful business on the Internet – which is increasingly dominated by a handful of behemoths. Just five internet companies, Amazon (AMZN), Alphabet (GOOGL), eBay (EBAY), Facebook (FB) and Liberty Interactive (QVCA) control 70% of the Internet industry’s revenue. Bankrate is just the latest example of a company trampled by a change by Alphabet. Demand Media (DMD), a provider of online content, has seen its shares crater 96% since 2011 as Google made changes to its proprietary search engine formula making it more difficult to find articles written by Demand Media.
Competing with Google head-on is not a good place to be – especially for companies like Bankrate that rely on good placement on Google’s search engine to get traffic and customers. Analysts are slashing estimates as a result on Bankrate. Analysts are now expecting Bankrate to earn 44 cents a share in fiscal 2016 – which is 36% less than what they were expecting three months ago, says S&P Global.