Google’s ad sales take a beating, a bad sign for wider economy
Summertime revenue growth at Google’s corporate parent slipped to its slowest pace since the pandemic jarred the economy more than two years ago, with advertisers clamping down on spending and bracing for a potential recession. Analysts said that’s a worrisome sign for the economy.
Alphabet Inc., which owns an array of smaller technology companies in addition to Google, posted revenue of $69.1 billion for the July-September quarter, a 6% increase from a year earlier.
Company Chief Executive Sundar Pichai described economic conditions as “uncertain” and said “it is a moment where you take the time to optimize the company to make sure we are set up for the next decade of growth ahead.”
Analysts see bad news ahead. “Online ad spending is clearly slowing more than we thought,” said David Heger, an analyst for Edward Jones. “It looks like it is going to be tough sledding for the next few quarters.”
“This disappointing quarter for Google signifies hard times ahead,” said Insider Intelligence analyst Evelyn Mitchell.
It’s the first time Alphabet’s year-over-year quarterly revenue rose less than 10% since the April-June period of 2020, the early months of the COVID-19 pandemic.
Ad sales weakened more dramatically than Alphabet’s overall revenue. Ad-related revenue totaled $54.5 billion, up 2.5% from the same time last year.
YouTube sales were down: quarterly ad sales decreased 2% from a year earlier, the first time the video site’s revenue has regressed since Google began disclosing its results in 2019.
The revenue slowdown dragged on Alphabet’s profit. The company earned $13.9 billion, $1.06 per share, a 27% drop from the same time last year. Alphabet’s shares declined nearly 7% in extended trading after the numbers came out. The stock price has plummeted more than 30% this year, erasing about $600 billion in shareholder wealth.
Snapchat app maker has been laying off workers and slashing projects that don’t contribute to user or revenue growth or to augmented reality efforts.
Google bounced back from the pandemic blues last year, with help from government stimulus spending: Alphabet posted a 41% sales increase last year that lifted its stock price to new peaks.
But the economy has been sputtering in recent months as the Federal Reserve Board steadily lifts interest rates to combat the highest inflation rates in more than 40 years, a strategy that is threatening to plunge the economy into a recession. As it is, many households have already tightened their budgets and cut back on some discretionary items — a trend that has prompted advertisers to spend less marketing their products and services.
Ruth Porat, Alphabet’s chief financial officer, predicted that the company will hire fewer than 6,380 workers during the final three months of this year, a more measured approach that Pichai said would continue into next year.
Although the economy is squeezing its finances, Google is faring better than other internet companies whose fortunes are tied to digital advertising. Facebook suffered its first year-over-year quarterly decline in revenue earlier this year. Another social networking company, Snap, has been so hard hit that its stock price this year has plunged more than 80%.
