Google's ad business struggled in the fourth quarter as YouTube saw its ad revenue decline 8% year over year to $7.96 billion, parent company Alphabet reported in its financial results on Thursday.
The YouTube ad loss was the second quarter in a row that revenue declined for Google’s video site. The ad results reflect a decline in demand that many digital ad platforms have experienced in recent quarters. This week, Meta and Snap also reported slowdowns in advertising and predicted further pressure on the market in the current quarter.
Google’s search ad business also declined in the fourth quarter to $42.6 billion, down 2% year over year. Google’s shares dropped nearly 4% in after-hours trading.
The lackluster results come as Google’s core advertising business is under threat on multiple fronts—and not just because of the slowed economy. The US Department of Justice and eight states sued the search giant last week over its alleged monopolization of the ad-tech market.
And the company’s flagship search business, which drives most of its ad revenue, may be under threat from new entrants. Google last year declared a “code red” in response to Open AI's popular chatbot, ChatGPT.
Related: A marketing guide to ChatGPT
On Thursday, in an earnings call with analysts, Google executives discussed advances in artificial intelligence, a theme that Meta also touted in its earnings call on Wednesday. Both companies are leaning into AI to power their ad platforms and improve marketer performance, particularly around e-commerce goals.
Philipp Schindler, Google’s chief business officer, outlined YouTube’s strategy with Shorts, the TikTok-style videos, and in connected TV. YouTube saw 50 billion views a day on Shorts in the fourth quarter, Schindler said. “We’re focused No. 1, ramping Shorts,” Schindler said. “No. 2, accelerating engagement on large screens. No. 3 investing in our subscription offering, and No. 4 our long-term effort to make YouTube more shoppable.”
Google has acknowledged the challenges it faces with an increased commitment to efficiency. In January, Alphabet slashed 12,000 jobs, or 6% of its global workforce—the largest job cuts in its history. Other major tech firms have done cuts at a similar scale. Meta has also promised a leaner, more efficient organization.