Google and YouTube's ad biz takes a plunge

Google reported advertising revenues of US$59.04 billion, a slowdown from US$61.24 billion in the year-earlier quarter, while YouTube saw in an approximate 8% drop bringing in US$7.96 billion in the last quarter. The results come as Google sees threats not just from the slowed economy and tech layoffs but also as it faces legal action from the US Department of Justice.Google search saw a dip from US$43.3 billion to US$42.6 billion and Google Network also dropped from US$9.3 billion to US$8.4 billion. 

Sundar Pichai, CEO of Alphabet and Google, said: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond.”

He added that the company sees great momentum in Cloud, YouTube subscriptions, and Pixel devices. “We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet,” Pichai said.

Earlier last month, the company also announced a reduction of its workforce of approximately 12,000 roles. “We expect to incur employee severance and related charges of US$1.9 billion to US$2.3 billion, the majority of which will be recognised in the first quarter of 2023,” read the financial statement. In addition, Alphabet is also taking actions to optimise its global office space.

During the exodus, much like the current statement, Pichai also shared his confidence in AI calling it a “huge opportunity” for the company despite the slashing of 12,000 jobs. In a statement to staff, Pichai said that due to the strength of the company’s mission, the value of Google’s products and services, and its early investments in AI, the company is now in a good position.

“Pivoting the company to be AI-first years ago led to groundbreaking advances across our businesses and the whole industry,” he said, adding that thanks to those early investments, Google’s products are better than ever. “We’re getting ready to share some entirely new experiences for users, developers and businesses, too. We have a substantial opportunity in front of us with AI across our products and are prepared to approach it boldly and responsibly,” he added.

Just weeks ago, the United States Justice Department filed its second antitrust lawsuit against Google in just over two years. This time, it focused on Google’s online advertising business by alleging that it is using anticompetitive behaviour to maintain a monopoly on digital ads.

Don't miss: Why Google is being sued by the US Justice Department for its ad biz

The suit alleges that Google buys up competition and strong arms advertisers into using Google’s ad technology over competing companies.

“Over the past 15 years, Google has engaged in a course of anticompetitive and exclusionary conduct that consisted of neutralising or eliminating ad tech competitors through acquisitions; wielding its dominance across digital advertising markets to force more publishers and advertisers to use its products; and thwarting the ability to use competing products. In doing so, Google cemented its dominance in tools relied on by website publishers and online advertisers, as well as the digital advertising exchange that runs ad auctions,” said a press release announcing the lawsuit by the United States Department of Justice.

Google’ search business, which drives most of its ad revenue, could also be under threat from new platforms such as OpenAI’s chatbot, ChatGPT.

This week, in an earnings call with analysts, Google executives also discussed advances in artificial intelligence in order to power its ad platforms and improve marketer performance, as detailed by media reports.

When it comes to YouTube, a decline in revenue could also be related to Apple’s privacy policies that have been hindering ad operations on iPhones and other devices. Apple has been steadily hindering the ability of apps to track consumers online which reduces its visibility into marketing and targeting data.

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