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Google search ad revenue grows, Microsoft drops, as recession fears mount

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Google search ad revenue grows, Microsoft drops, as recession fears mount

Alphabet’s Q2 and Microsoft’s Q4 earnings weren’t quite on target, but not as bad as some may have expected.

on July 26, 2022 at 7:49 pm | Reading time: 3 minutes

Google and Microsoft released their quarterly earnings yesterday. Both companies missed the mark and fell short in some areas, but for the most part hold steady given circumstances such as the war in Ukraine (pulling their services out of Russia), supply chain issues, economic uncertainty, and hiring freezes.There are growing fears of a global recession. But you wouldn’t know it by listening to today’s earnings calls. It wasn’t mentioned, once. But it was alluded to.

Here are some key takeaways:

  • Total Alphabet revenue 13% increase YoY to $69.7 billion (from $61.9 billion by the end of Q2 in 2021)
  • Google Ad revenue $56.3 billion (up from $50.4 in 2021)
  • YouTube revenue $7.3 billion (up 5% from $7 billion in 2021), which missed analysts’ predictions of $7.5 billion
  • Microsoft ad revenue decreased by about $100 million due to reductions in advertising spend
  • LinkedIn revenue increased 26% (up 29% in constant currency)

Holding steady. Google claims that despite some pullback from advertisers and the loom of financial uncertainty, performance in search was strong and “customers are still seeing value.” During the earnings call CEO Sundar Pichai spoke about search changes and increased opportunities for shopping, as well as attempts to compete with TikTok and Instagram.

YouTube Shorts momentum. Pichai said YouTube Shorts are watched by over 1.5 billion signed in users per month, and over 30 billion daily views. Subscribers surpassed 5 million subscribers – including trials. Last week a partnership with Shopify announced giving advertisers and creators additional opportunities to promote products.

Summer search trends. Philipp Schindler, CBO, Google adds that last minute hotel deals and summer vacations increased substantially. Travel brands continued to utilize new tools to streamline the booking and reservation processes. Retailers taking advantage of a full omnichannel strategy including using curbside and pickup features increased revenue by as much as 34% from last year. Schindler continues that searches for “open now near me” were up 8x globally YoY, while searches for “designer outlets” jumped 90%. Additionally, apparel categories such as women’s clothing and other beauty categories such as perfume and fragrances gained interest.

Performance Max. I didn’t think we would get off the earnings call without talking about Performance Max. Schindler mentioned that the adoption of Performance Max campaigns are up 5x year to date. Though, it’s not mentioned if those numbers include accounts that have been automatically updated to PMax from Smart Shopping.

New developments. 3D AR features are also available to a few retailers such as Target and Wayfair, allowing customers to shop for products in real life. Additionally, the new ad formats allow for a more visual browsing search. CTV viewership is 3.1x more effective than regular tv, and CTV markets will be expanded to LATAM and EMEA markets. Lastly, Schinder mentions that full funnel strategies are gaining speed and advertisers that use them experience 80% unique reach across brand and action campaigns.

Listen to the call. If you’re interested in the full Alphabet earnings call, you can listen here.You can also view the Alphabet earnings report here, and the Microsoft report here.

Why we care. Though the numbers aren’t as good as analysts may have predicted, Google ads aren’t going anywhere any time soon. New products in CTV, gaming, Shorts, and shopping are keeping ad revenue afloat, despite some advertisers abandoning the platform altogether. Given that they can’t gain any more market share, new products and features will be the only way to keep the momentum going (outside of charging more for advertising). I’ll be curious to see how the adoption of new features pans out in Q3.

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