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Google's Advertising Business Shows Signs of Fatigue

Google's Advertising Business Shows Signs of Fatigue

Enterprise & IT Feb 3,2020 0

Alphabet Inc. reported revenue from the key holiday quarter that missed expectations, suggesting the company’s Google advertising business is struggling to maintain growth.

Revenue, excluding payments to partners, was $37.6 billion in the fourth quarter. Ad revenue in the quarter rose 17%, slower than the 20% year-over-year growth from in the same quarter a year earlier. Google has blamed foreign exchange rates and one-time product changes.

“Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet,” said Sundar Pichai, Chief Executive Officer of Alphabet and Google. “I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate."

“In 2019 we again delivered strong revenue growth, with revenues of $162 billion, up 18% year over year and up 20% on a constant currency basis,” said Ruth Porat, Chief Financial Officer of Alphabet and Google. “To provide further insight into our business and the opportunities ahead, we’re now disclosing our revenue on a more granular basis, including for Search, YouTube ads and Cloud.”

Amazon.com has become a major digital advertising rival in recent years, grabbing more valuable shopping-related searches from Google. The e-commerce giant saw a surge in revenue from its ads business during the holiday quarter.

The also company disclosed YouTube and Google cloud revenue for the first time. YouTube advertising revenue rose 31% to $4.7 billion in the fourth quarter. YouTube revenue in 2019 was $15.15 billion, up 36% from 2018 and nearly twice that of 2017.

Overall sales were $46.08 billion, up 17%. Cloud sales, including computing power and internet-based productivity software, totaled $2.6 billion, up 53% from a year earlier.

Alphabet’s total costs and expenses rose 18.5% from a year ago to $36.809 billion.

Expenses have ballooned with hiring of thousands of salespeople, building of new data centers and marketing the Google brand through hardware and other ventures.

The search-engine powerhouse, whose market value topped $1 trillion last month but has since dropped below that mark, is one of four major tech companies under investigation by federal regulators for its business practices.

Tags: GoogleAlphabetfinance
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