Google Earnings Show Advertising Demand Slowing, Posts Drop In Revenue

Alphabet reported revenue Thursday of $76.05 billion in Q4 2022, up 1% year-over-year, but missing analysts’ expectations by $440 million.

Revenue came in at $283 billion for the full year 2022 -- up 10%.

“We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth,” stated Ruth Porat, CFO of Alphabet and Google.

Of that, Google advertising came in at $59.04 billion in Q4 2022, compared with $61,24 billion in the year-ago quarter.

YouTube ads contributed $7.96 billion in Q4 2022, compared with $8.63 billion in the year ago quarter.

Google’s network generated $8.48 billion in Q4 2022, compared with $9.305 billion in the year-ago quarter.  

In January, Alphabet reduced 12,000 jobs, 6% of its global workforce, in an effort to recover.

"Google closed the year in a very different place than it was in this time last year,” stated Insider Intelligence Analyst Evelyn Mitchell. “For the second quarter in a row, Google has missed analyst expectations, eking out just 1% growth year-over-year.”

Mitchell acknowledged that total ad revenues fell for the second time in Google's history, the first being Q2 of 2020.

Insider Intelligence expects Google to generate $180.59 billion in net digital ad revenue in 2023, up 7.2% compared with last year.  It gives the company a 28.8% share of the worldwide digital ad market. Facebook is second with an 11.4% share. Worldwide search ad revenue should come in at $147.33 billion. That equates to 59.5% of the global search ad market. 

“YouTube's poor performance was expected, as privacy changes have hindered targeting and competition has mounted,” she noted. “But even search revenues, which are performance-driven and typically insulated from ad spending downturns, also declined. These results, from a company as large and influential as Google, do not bode well for the rest of the digital advertising industry."

Insider Intelligence expects YouTube's net ad revenue will grow 11.2% this year to reach $17.00 billion worldwide. YouTube's share of Google's net ad revenue worldwide will be 9.4% based on 2.30 billion viewers worldwide in 2023, up 3.3% over 2022.  That represents 63.3% of digital video viewers worldwide.

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