Google ’s total revenues have increased 3% or 6% to $69.8 billion from $68 billion a year earlier. But finance chief Ruth Porat says the outlook remains uncertain due to the challenging economic environment.
Alphabet, Google’s parent company, in the earnings reports stated that ad revenue beat analyst expectations, but fell from the year prior to $54.55 billion, while YouTube ad revenue stayed in line with analyst expectations, also declining from a year ago. Advertising revenue had slipped 4% in the final three months of 2022, marking only the second quarterly decline in the company’s history.
It should be noted that Google’s search advertising business returned to growth, with revenue rising 2% in the quarter. Philipp Schindler, Alphabet’s Chief Operating Officer, told financial analysts that in Google Advertising, Search, and Other, revenues grew 2% year-over-year, reflecting an increase in the travel and retail verticals, offset partially by a decline in finance. Excluding currency headwinds, he highlighted that revenue trends for search advertising were actually similar in the first quarter versus the previous quarter.
Schindler believes this reflects what’s being reported elsewhere, many companies are very focused on shorter-term profitability amidst this uncertainty and some pullbacks in budgets as well.
Performance Max
Google has high hopes for “Performance Max” – a hotel advertising tool. It enables hotels to create digital ads in multiple formats to reach travelers across six of its ad channels, Display, YouTube, Search, Gmail, Discover, and Maps. Performance Max streamlines the multi-channel creative process. It has the ability to reach users across the full range of Google inventory, expand brand reach with additional ad formats and channels, and utilize strategic inputs to help steer Google’s AI for maximum performance.
Google touts Performance Max for Travel goals campaigns help the sector increase direct bookings across all of Google’s advertising platforms and inventory. It increases the number of touch points with customers during their discovery, consideration, and purchase journey. Dedicated to the hospitality industry, Performance Max is a powerful tool that uses Google’s machine learning to optimize ads across all Google surfaces to get more direct bookings.
Schindler said Carita Hotels Group in Indonesia recorded a 32% revenue increase and a 26% rise in direct bookings after using the Performance Max tool for a month. He shared that Google will add more AI features, and give an update in May.
Profitable Cloud
Alphabet said Google’s cloud business is profitable for the first time in three years. The division generated $191 million in operating income on $7.45 billion in revenue in the first quarter, while a year ago, it saw a $706 million loss on $5.82 billion in revenue. Sundar Pichai, Google CEO, said the 28% growth in Google’s cloud division was renewed momentum in the business
However, it’s slowing growth. Ray Wang, founder and principal analyst at Constellation Research, said it shows how long a time horizon it requires to get to this point in this market. He acknowledged it as a significant milestone for Google Cloud, which started in April 2008. Its profitable 15 years later. Wang believes this shows how hard it is for new players to enter the space. Max Willens, senior analyst at Insider Intelligence, pointed out that slowing growth tempers the profitability news. He attributed Google’s Cloud profitability to the management’s diligence in steering the division. However, Willens said Google Cloud remains behind its two most important competitors amid slowing growth.
