Google search ads beat expectations despite economic slowdown

Alphabet Inc today shared its financial results for the second quarter ended June 30, and Google’s search ads revenue beat analysts’ expectations despite the economic slowdown. 

The parent company reported a quarterly revenue of $69,69 billion, with 81% coming from its overall ad business which brought in $56.2 billion. It also generated $7.34 billion from YouTube ads and $6.28 billion from Google Cloud services. 

As reported by Reuters, the company failed to meet analysts’ forecasts of $7.5 billion and $6.4 billion for YouTube ads and Google Cloud respectively. However, despite the ongoing economic turndown which has led to a sharp decline in ad budgets generally, Google’s search ads revenue increased by 14% to $40.69 billion in Q2, beating the $40.5 billion forecast of FactSeat. The main driver of this growth was travel and retail advertisers. 

Last week, Snapchat shares fell down as much as 25% after the social media company reported a quarterly revenue of $1.11 billion, failing to meet the $1.14 billion expectation. The company said advertisers are cutting their ad budgets due to several reasons caused by the slowdown, including rising costs and supply-chain disruptions. 

Meanwhile, Twitter reported a revenue of $1.18 billion for the quarter, which dropped 1% year-over-year and failed to meet Wall Street’s expectation of $1.32 billion. It’s ad revenue grew only 2% to $1.08 billion, and the company attributed the decline in growth to the ‘’headwinds’’ in the ad industry and the“uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.” In April, Tesla CEO offered to purchase Twitter for $44 billion. While Twitter accepted the offer, Musk turned down the deal and was sued by the social media giant for walking away. 

Alphabet’s financial results show that Google’s ad business is performing more resilient to the economic slowdown, when compared to social media companies. However, aside from search ads, it still failed to meet most of the expectations. 

Last week, the company announced that it paused hiring for two weeks to review headcount needs’, joining other tech titans that announced either lay-offs or hiring freezes, including Shopify, Meta, Apple, Twitter, Snapchat, Netflix and Spotify. 

According to the Wall Street Journal, Google was also among the top contenders for Netflix’s upcoming ad-supported subscription tier. However, the streaming company recently announced that it chose ‘Microsoft’ as its advertising partner.