The news: Google’s parent company Alphabet posted Q2 earnings demonstrating that the vaunted internet giant isn’t immune to the problems facing the rest of the advertising world.
The results: The company delivered revenue of $69.69 billion ($56.29 billion from advertising), roughly in line with expectations, representing 13% growth year-over-year in Q2 (17.5% for the year to date). That’s a tough comparison with 62% growth last Q2—though of course, the 2021 increase was over the early months of the pandemic.
- Analysts anticipated overall Q2 revenue of $69.9 billion and $57.7 billion after deducting traffic-acquisition costs (TAC), up from $50.95 billion ex-TAC in the same time period last year.
- Google search revenues rose 13.5% to $40.7 billion, but YouTube ads grew just 4.8%.
- But expense growth outpaced revenue growth: The cost of revenues increased 14.78%, and total cost and expenses jumped 18.1%.
The bright side: Over the past few years, Google and Meta have monopolized the majority of digital ad spend—but recent challenges at Meta may benefit Google.
- Apple’s 2021 AppTrackingTransparency regime could result in a $10 billion revenue drop, according to Meta; in part due to its licensing agreement with Apple—worth over $12 billion yearly—Google isn’t taking that deep of a hit.
- Apple's privacy updates caused some advertisers to cut their spending with Meta and other social platforms and move more spend to Google. Prior to ATT, Google was already the top advertising platform; after ATT, its dominance over Meta became more secure.
During an economic slowdown, advertisers pay closer attention to their ad investments. For that reason, high-ROI solutions like those Google offers will remain strong—at least when compared with top-of-funnel options and brand advertising. For many advertisers, Google search is one of the highest-ROI solutions in their arsenal.