Melting Profits – Google Mom Feels Downturn In Online Advertising

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Melting Profits – Google Mom Feels Downturn In Online Advertising

Google is also feeling the effects of the downturn in the online advertising market: the business grew more slowly in the past quarter and the profit of parent company Alphabet fell sharply. At the same time, the online giant showed that it is well positioned to weather the weakness of the market better than its smaller competitors.

Alphabet’s quarterly profit fell year-over-year from $18.5 billion to $16 billion, the internet giant announced Tuesday after the US market closed. Meanwhile, sales rose 13 percent to $69.7 billion.

The group’s core business – Google’s advertising business – grew 11.6 percent year-over-year to $56.3 billion.

Does Google’s size protect against the downturn?
With high inflation and a slowing economy, online ad spend is on the horizon as businesses keep costs in check. That was noticeable with the video app Snapchat with the lowest growth to date. One question is whether the two giants, Google and Facebook, will also feel the effects of the slowdown – or whether their size and efficiency will make them more attractive to advertisers, especially in the current situation.

Google’s Internet search advertising business grew 13.5 percent year-over-year to approximately $40.7 billion. Revenues on the video platform YouTube grew more slowly than before, by 4.8 percent to more than $7.3 billion. CFO Ruth Porat pointed out that last year’s quarter had been exceptionally strong with the rebound after initial pandemic restrictions eased. At the same time, she admitted that some advertisers were cutting their spending. The operating profit of the Google services only grew from 22.34 to 22.77 billion dollars. Headwinds are expected in the current quarter, Porat said.

The race to overtake Amazon and Microsoft in the cloud business continues to cost Google a lot of money. While the division’s revenue grew 35.6 percent to nearly $6.3 billion, operating loss also increased 45 percent to $858 million.

Missed expectations, fair still satisfied
Despite falling short of some analysts’ expectations, investors were pleased with the numbers, leading Alphabet’s shares to gain 4.8 percent in after-hours trading. Snapchat company Snap, on the other hand, fell more than a third after being disappointed with weakening growth last week.

“I think it’s a good time to sharpen our focus,” Sudar Pichai, CEO of Google and Alphabet, said in a conference call with analysts. The group continues to think in the long term and invest in, among other things, artificial intelligence.

Sales of the so-called “other bets” under the Alphabet umbrella, such as robot car company Waymo, stagnated at $193 million. At the same time, the area’s operating loss grew from $1.4 billion to nearly $1.7 billion. At Waymo, Alphabet is currently investing in the development of a robotic taxi service in San Francisco, among others.

Source: Krone

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