Google reports first-ever quarterly decline
Google reported its first-ever quarterly decline Thursday, as the Alphabet-owned company was set back due to sharp declines in travel and overall ad spend from Madison Avenue.
Ad sales fell 8 percent to $29 billion in the second quarter while overall revenue slipped 2 percent to $38 billion. The company’s largest money maker, Search, generated $21 billion, down 10 percent year-over-year. YouTube, meanwhile, was among a handful of bright spots for the company, as revenue increased 6 percent in the second-quarter to $3.8 billion.
The search giant said it was cautiously optimistic for the second half of the year, as it saw a rebound from both consumers and marketers in June and July.
“Ad revenue gradually improved across Search, YouTube and our network,” Ruth Porat, chief financial officer at Alphabet and Google, said in regards to the growth in ad spend. “However, it is premature to say we are out of the woods given the fragile nature of the macro environment.”
Other industry bellwethers such as Facebook and Amazon have benefited from COVID-19. Consumers are ordering more products online and spending time on social media apps like Instagram. Alphabet and Google CEO Sundar Pichai took notice, and emphasized the company is making significant investments in its commerce and YouTube to capture more growth amid the coronavirus pandemic.
Google earlier this year hired former PayPal chief operating officer Bill Ready to build out the company’s commerce offering. The company has made radical changes to lure both buyers and sellers to its platform, some of which include offering free ads on its home page and Shopping tab. It has also removed merchant fees associated with selling goods on its platform while giving retailers valuable data on what type of products consumers are searching for.
The company says it is largely focusing on making sure the goods available through its commerce offering are "comprehensive and simple to transact."
“In some ways it’s a return to our principles,” said Pichai.
Prior to the pandemic, YouTube was Google’s fastest growing ad offering. Its progress, however, was hampered in the second quarter by brand advertisers pulling back ad spend. That offset the “substantial growth” YouTube saw from its direct response ads, which are ads that involve consumers taking some sort of action upon viewing.
Pichai this week appeared in congressional hearings alongside CEOs from Amazon, Apple and Facebook. “On the regulatory front we have obviously been operating under scrutiny for a while and we realize at our scale that is appropriate,” Pichai said. “We will operate under the rules and any areas we need to adapt, we will."
"I think the scrutiny is going to be here for a while and we are committed to working through it," he added.