Apr 27, 2022 - Economy

Google faces different reality this year

Data: Yahoo Finance; Chart: Axios Visuals
Data: Yahoo Finance; Chart: Axios Visuals

Outdoing yourself is going to be hard this year — especially if you’re a company whose business benefited from pandemic-induced conditions.

Driving the news: Google parent company Alphabet reported an 8% drop in quarterly profit as two crown jewels in its business showed signs of slowing growth from last year.

By the numbers: Google’s search revenue reached $39.6 billion, but growth fell from 30% in the first quarter of 2021 to 24% this year.

  • Ads from YouTube, one of those crown jewels, brought in $6.9 billion in revenue, a 14% increase over the same period last year. 
  • But that paled in comparison to the 49% growth from 2020 to 2021, and analysts had expected revenue to top $7.5 billion.

The big picture: Google and YouTube benefitted from people being at home during the pandemic.

  • YouTube then started to face more competition for how people spent their time, facing competition from TikTok and the resumption of pre-pandemic activities out in the world.
  • Advertisers in Europe meanwhile grew cautious of spending when Russia invaded Ukraine. 

What they’re saying: “About 1% of Google revenues were from Russia in 2021, and that was primarily from advertising," CFO Ruth Porat said on a call with investors. "[And] from the outset of the war, there was a pullback in advertiser spend, particularly on YouTube in Europe.”

What to watch: In addition to the conflict in Ukraine, inflation is another key factor to watch this year as advertisers may pull back if consumer spending slows down.

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