YouTube Ad Revenue Growth Drops Sharply in Q2 | Advertising

YouTube’s ad revenue deceleration is accelerating as it struggles to keep up with 2021’s “extraordinary” growth rates and a pullback in ad spend amid growing macroeconomic challenges.

The video streaming giant reported ad revenue growth of just 5% to $7.3 billion in the second quarter of 2022, compared to 14% in the first quarter and a remarkable growth rate of 84% in the same period. last year.

Ruth Porat, chief financial officer of Google, the parent company of YouTube, told investors on Tuesday (July 26) that the “modest” year-over-year growth rate primarily reflects the exceptionally strong performance in the second quarter of 2021. She said warned that difficult comparisons would continue. to weigh on ad growth rates for the rest of the year.

YouTube’s quarterly decline in growth reflects cuts in spending by some advertisers, Porat said, but she did not detail or elaborate on the ad sectors affected. Porat said the setbacks reflect “uncertainty around a number of hard-to-disaggregate factors.”

Russia’s war with Ukraine, which drove down ad spending by European advertisers in the first quarter, was a “modest headwind” in the second quarter, while Apple’s ATT framework remains an ongoing challenge, Porat said.

Google Chief Commercial Officer Philipp Schindler sought to temper worries about YouTube’s outlook by pointing to investments in its full-funnel capabilities, “encouraging” YouTube Shorts early monetization tests, and “satisfying” commitments made during YouTube’s initial first season this year. Again, the company was light on the details.

YouTube Shorts, the platform’s TikTok-like short video offering, now has 1.5 billion monthly logged-in users, the company said.

Google’s network revenue of $8.3 billion, which is revenue generated from the sale of ads outside of its own properties, also saw a slowdown in growth rate to 9% from 20% in the first trimester.

Search ads revenue grew 13.5% to $40.7 billion, beating analysts’ expectations of $40.15 billion, but that was also a deceleration from the 24% growth rate of the first trimester.

Google’s total ad revenue increased 12% to $56.3 billion in the quarter ended June 30, 2022.

Slowdown in hiring and increased focus

Parent company Alphabet’s second-quarter total revenue rose 13% year-on-year to $69.7 billion in the quarter, but net profit fell 14% to $16 billion.

Alphabet and Google CEO Sundar Pichai told staff earlier this month that the company was slowing hiring and fine-tuning its efforts in the face of an “uncertain global economic outlook.”

Artificial intelligence and the cloud were dubbed “critical areas” for long-term growth during Tuesday’s call with investors.

“As I said at the company, it’s a good time to sharpen our focus. Personally, I find moments like these clarify,” Pichai said. “It gives us a chance, after a few years of strong growth, to double down and focus. We’re going to be disciplined in our approach, but our focus on long-term areas, whether it’s AI, cloud and other critical areas, will continue.

Google’s cloud revenue rose 36% in the second quarter to surpass the $6 billion mark, but its operating loss fell to $858 million from $591 million in the previous quarter. Porat said the company needs to balance investments to support long-term growth with profitability. The largest investments made by Alphabet in the second quarter were in servers and data facilities.

Alphabet added 10,108 employees in the second quarter, but said it intended to slow the pace of hiring for the rest of the year and focus more heavily on “engineering, technical roles and other critical roles”. It has 1,74,014 employees worldwide.

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