YouTube's ad growth slows, partly from Apple's data limits

YouTube’s growth in advertising revenue slowed in the first quarter of 2022, according to the parent company Alphabet, which also runs Google and released its financial report on Tuesday. Alphabet executives called out the YouTube weakness in the report, saying that it was partly due to the war in Ukraine, which disrupted services in Europe and led to lower demand from brands there. But YouTube also has been stressed by privacy rules and data restrictions, like Apple's anti-tracking policies, that affected direct-response advertising. In the first quarter this year, YouTube's revenue increased 14.9% year over year, from $6 billion to $6.87 billion. That was a smaller boost compared to the last quarter, when YouTube ad revenue was up 25% year over year. Meanwhile, YouTube’s ad revenue increased 48.71% year over year in the first quarter of 2021, when the growth was substantially high due to the surge in online activity through the first year of the pandemic. “The largest factor was lapping an exceptionally strong [first] quarter [in 2021] in direct response,” said Ruth Porat, chief financial officer of Google and Alphabet. YouTube is an important component of Google's advertising business. The video site is one of its biggest draws for brands, especially as the company heads into NewFront season, the time of year when platforms pitch advertisers to score big ad commitments. In its earnings call, Google execs discussed how YouTube's growth rate had been affected by global issues and internet policy changes, like updated privacy rules on web browsers and mobile devices. TV Upfronts and Newfronts 2022 calendar The war in Ukraine, which began in late February, had an outsized impact on YouTube’s ads, Porat said. In March, amid increasing pressure to exert sanctions against Russia, Google suspended a majority of its commercial activities in the invading country, including those of YouTube. YouTube also saw a reduction in spend from brand advertisers in Europe because of the war. Related: Ad spending is decreasing—and more cuts may be coming Other reasons given for the slowdown include Apple’s "app-tracking transparency" update, which took effect last year. Apple's anti-tracking policies limited the amount of data-sharing on Apple devices. The advertisers cannot follow when an ad leads to a sale, since consumers don't permit marketers to see their online pathway. On YouTube, that means it is more difficult for brands to see when a video ad takes a consumer to another website for a purchase or other direct-response goal. Google's total ad revenue saw a better quarterly performance than YouTube, increasing 22.33% year over year, from $44.68 billion to $54.66 billion. Google's main ad business also experienced some fallout from decreased activity in Russia. About 1% of Google’s revenues in 2021 were from Russia, the bulk of which was via advertising, Porat said. Still, Google's ad revenue missed Wall Street analyst expectations, which sent the stock down in after-hours trading. Alphabet’s stock on Tuesday dropped 6.41% in after-hours trading, as of press time. Privacy was hardly mentioned during the earnings call as Google prepares to axe cookies in 2023. The company earlier this year unveiled a new tool to potentially replace the third-party trackers on Chrome and Android. Alphabet also discussed Shorts, which is a growing new video format that was launched to compete with TikTok. While Shorts videos average more than 30 billion daily views—four times as many as last year—the ad model is still being developed. Execs said YouTube is still experimenting with monetization and early advertiser feedback is encouraging.

YouTube's ad growth slows, partly from Apple's data limits

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