Google Parent Alphabet Reports Disappointing Online Advertising Revenues

Alphabet’s earnings have dropped almost entirely across the board with the Google parent company’s advertising revenue being hit particularly hard.

YouTube, for example, was expected to bring in revenues of $11.61 billion but only managed $11.06. Last year, YouTube took in $11.28 billion in advertising revenue.

Google Search advertising brought in $61.79 billion, up four per cent. Network advertising revenue was $12.36 billion, down two per cent.

Alphabet’s overall revenue growth slowed to six per cent from 41 per cent earlier in the year, which can largely be attributed to a changing online ad spending market.

Other revenues, meanwhile, were $10.79 billion, up two per cent, thanks to subscriber growth in YouTube Music Premium and YouTube TV – both services do not offer ads. Strong sales of the Pixel 6a smartphone, also helped.

During a webcast with investor, Ruth Porat, chief financial officer of Google and Alphabet, said that the results reflect “healthy” and “fundamental” growth in Search. She also said that lower levels of users engagement on Google Play were to blame for disappointing revenue figures in that area of the business.

She went on to explain that the year-over-year deceleration in advertising revenues for the entire company was due to impressive growth in previous years and a “pullback” from some advertisers that the company first noticed last quarter.

The markets, however, did not agree. Alphabet’s shares dropped by 6.2 per cent once the results were released in after hours trading. The company’s share price for the year was down by 28 per cent overall.

Google’s operating expenses, according to Porat, grew by more than a quarter to $32.54 billion, thanks to an expanded headcount and increased R&D spending. Alphabet’s sales and marketing costs grew, as well, due to increased spending on ads and promotions and, again, headcount growth.

“We’re sharpening our focus on a clear set of product and business priorities,” wrote Sundar Pichai, Alphabet CEO in a press release.

“Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts. We are focused on both investing responsibly for the long term and being responsive to the economic environment.”

Last month, Pichai said that he wanted to make the company 20 per cent more efficient and did not rule out slashing jobs and product cuts. Google cancelled the latest generation of its Pixelbook laptop and dissolved the team developing it, as well as canning its Stadia game streaming service, and cut funding for its Area 120 tech incubator and cut the units projects and teams by around half.

Alphabet and its various subsidiaries are not the only tech companies to be feeling the pinch. Snap’s earnings tanked against expectations last week and Microsoft’s cloud revenues dropped

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