Alphabet, the holding company which owns Google and its affiliates, announced a decrease in advertising revenue and was the first time since the start of the COVID-19 pandemic that Alphabet did not see double digit revenue growth. Instead Alphabet, and Google specifically, saw a decrease in revenue across the board. Google’s advertising platforms have been a major cash cow and source of revenue which Alphabet currently has; with roughly $116 billion cash on hand. There were decreases in revenue across the board between Youtube, the Google Display Network and Search Advertising. There are a myriad of factors which contributed to the decrease in Google’s advertising revenue. Some related to Google’s business and others which align with macro conditions of the economy. On the whole, Google’s revenue increased thanks to their strong growth within their cloud services offerings.
Why is Google Making Less Money From Google Ads?
As we know, Google Ads covers the entire Google ecosystem of advertising placements. This includes Google Search Ads, Google Display Ads and Youtube Ads. Individually each of these segments saw decreases in total revenue and added together sum a decrease of ~4% for Q4 year-over-year.
According to Google and other market analysis, one of the main reasons for this decrease in revenue is a change in the macroeconomic conditions. As money has become tighter for businesses they have less available capital to spend on marketing sources as they had previously. Considering the availability of cash during the prior year, this certainly could be a contributor to revenues decreasing as businesses have less available cash to spend on marketing. Another contributing factor to a decrease in Google’s revenue with the changing macroeconomic conditions is the fact that tracking and control have become increasingly difficult for marketers in the Google Ads interface. The less control a business owner has over their marketing campaign, and the less visibility they have into its success, the more likely that business owner is to limit spending or shut down this marketing campaign altogether.
Should Marketers Be Worried?
A decrease in revenue from Google Ads for Alphabet could signal a weakening in the dominance of Google as the world’s leading search engine. Studies have already revealed that many people in younger generations are already turning to TikTok as a search engine in lieu of Google. While these considerations may be worrisome for marketers, they should rest assured that Google’s dominance is not going anywhere soon. Marketers should not be worried. Google still offers the best intent targeting possible on the internet through their Search Ads and continues to offer comprehensive marketing offerings through Display and Youtube Ads.
While marketers, and business owners, can rest easy knowing that Google Ads management will not be going anywhere anytime soon, it is crucial to continually monitor emerging digital sources for areas of growth. Doing so can ensure stability within your overall marketing plan by offering additional flexibility when one particular source loses visibility. It will certainly be interesting to see how Google reports revenue next year to see if the negative trend continues in a downward direction and provides an interesting backdrop to the case being brought against Google by the Department of Justice in September.