Latest news on the Google revenue slowdown
This is an article ‘Latest news on the Google revenue slowdown’ by Marc Primo
Just as 'back in business' signs are being displayed on storefronts worldwide, big tech seems to face sudden insurmountable financial obstacles in the new normal. With more lenient COVID-19 protocols that allowed employees to return to their desks, Meta has recently lost billions in revenue, with 13% of its workforce abruptly laid off, along with Twitter seemingly undergoing turnover and operational crises. On top of that, Google reported a revenue slowdown that could soon turn the world of digital marketing upside down.
While Google seems sound in the digital advertising world, current economic plunges and a looming recession do not save big tech firms from its effects. Alphabet, the platform's mother company, shared its third-quarter earnings that didn't prove to be satisfying for Wall Street estimates. Because of a sharp slowdown in the growth of Google's core advertising performance, its sales and profit numbers fell on year-on-year comparisons. Its net income took a nosedive by 26% compared to last year's quarter at $13.9 billion, around $2.5 billion short of analysts' projections.
Concerning revenue, the platform reported an increase of 6% year-on-year or $69.1 billion. While its advertising figures are on the upswing by 2.5%, they are still far from the 43% it registered during 2021 to 2020 comparisons. YouTube, which saw itself struggling after TikTok's competitive rise in the online advertising space, took a blow with a 2% decline in revenue this year.
Such drastic turnouts in the company's financial sheets caused a dip in shares with a 6% decrease after late October trading. According to lead management, the focus is being shifted to a clear set of product and business priorities.' This comes with the acknowledgment of a declining trend in online advertising spend triggered by higher inflation rates and the economic effects and global unrest brought about by Russia's invasion of Ukraine. At any rate, the company gears towards more long-term investments that can be favorable to the current economic environment.
The slowdown in growth doesn't mean that Google is on its way out, but its current revenue figures are something to be alarmed about nonetheless. Revenue for its Google Cloud platform increased 37% year-on-year with $6.9 billion in the third quarter, but net loss soared by $45 million compared to the same period last year.
According to ad tech experts, the apparent slowdown in revenue can be significantly attributed to the digital ad market industry's rebound experience in the early days of the pandemic. More consumers opted to shop online; naturally, more companies resorted to placing their ads on various social media platforms than spending on traditional advertising.
However, Google's third-quarter performance still indicates ominous projections moving forward for the entire tech industry, which companies need to address immediately. While the search engine is not significantly affected by Apple's App Tracking Transparency changes, YouTube is not spared from the new feature, which could have affected its third quarter revenues.
Today's troubled global economy caused severe fluctuations in ad spending across crucial verticals, causing reductions in financial sectors such as insurance, loans, mortgages, and cryptocurrency firms that lowballed their search investments since the year's second half. Fewer users are turning to Google Play for app downloads, significantly affecting ad revenues.
Going back to YouTube, the video-sharing site continues to wane in terms of performance this year caused by a pivoting preference for shorter videos on such platforms as Tiktok. Despite introducing its own version via Shorts, the traction for monetization is yet to gain ground, and there's the arduous task of getting a larger audience share. The Shorts alternative currently attracts around 1.5 billion monthly viewers, with 30 billion daily views. When it started running ads last May, it still needed to develop a surefire way to retain creator talent that could prop up its engagement and revenue figures.
However, there's hope as the creator economy continues to show a steady upward trajectory this year. By the third quarter, the niche industry is estimated to be a whopping $10 billion, thanks to the growing number of bloggers, social media influencers, streamers, and video producers.
By 2023, Google is now planning to launch a revenue-sharing program via Shorts to get more win-win propositions out on the table. With happier content creators retained on the platform, its ad revenues can increase while raising more appeal to top-tiered micro-influencers who are currently killing it in the ad market. Such partner programs are also being reviewed and even implemented by the competition. The key factor is who can lure more talent on their platforms without setting algorithm boundaries.
The search giant's business units are currently on trial among its investors and shareholders, with left and right underperformers. The company's sister segment Waymo and its self-driving cars also suffered a disappointing third-quarter net loss amounting to $1.6 billion amid expansion plans and a new CFO in former Apple manufacturing finance director Elisa de Martel. But what's most troubling is how Google's core ad search segment seems to be losing the interest of internet users worldwide.
The company will realign its resources to more extensive growth investment opportunities to curb the revenue downturn. Since the third quarter results, the company has begun shifting away from non-performing efforts. While it is not poised to follow the Meta and Twitter playbooks, management reported a decrease in additional headcounts for the last quarter of the year after hiring 12,700 professionals the quarter prior.
While trying to match the year-on-year revenue might be a long shot, dollar fluctuations will also prove to be a continuing burden for Google, making things more difficult for analysts to create financial projections for the fourth quarter.
What's left for the company is to rely on the data and insights it currently has and perform the necessary course corrections to get back on track. As per one of its studies, Google claims that 40% of Generation Z and Millennial Americans prefer TikTok and Instagram as their search engines. Rethinking how they can retain engagement and interest among the younger generation while offering new and exciting in-platform experiences is the best step forward.