The world’s largest provider of search and video made a
fortune over the last two years as the pandemic forced more shops and people
online. But outdoing those sales is proving difficult so far this year with the
war, rising inflation and product shortages causing advertisers to dump
marketing campaigns, according to analysts.
Alphabet chief financial officer Ruth Porat said it was too
early to predict when sales slowed by the war may pick up and warned that the
strengthening U.S. dollar would hurt sales even more in the current quarter.
Sales miss
Alphabet said first-quarter sales rose to $68.01 billion
(€62.27 billion), up 23 per cent from last year but below the average estimate
of $68.1 billion among financial analysts tracked by Refinitiv, its first miss
since the fourth quarter of 2019.
Notably, YouTube advertising sales of $6.9 billion missed
analysts’ target of $7.5 billion, according to FactSet.
Porat said the war in Ukraine that began during the quarter
had an “outsized impact” on YouTube revenue because the company stopped ad
sales in Russia and brand advertisers, particularly in Europe, pulled back on
spending after fighting broke out.
Google overall derived 1 per cent of its sales in 2021 from
Russia, Porat said.
She also reported moderating growth in sales to
direct-response advertisers on YouTube, and added that cuts to app store fees
to address antitrust concerns had wiped out gains in subscription revenue.
Google’s “other” revenue, which includes app, hardware and
subscription sales, were $6.8 billion, below estimates of $7.3 billion.
Quarterly profit was $16.44 billion, or $24.62 per share,
missing expectations of $25.76 per share.
Alphabet also said its board had authorised an additional
$70 billion in stock repurchases. It has bought back over $81 billion in shares
over the last two years.
Ad slowdown
Google is expected to grab 29 per cent , or the leading
share, of the $602 billion global online ad market in 2022, at least the 12th
straight year it has been on top, according to Insider Intelligence.
Facebook parent Meta Platforms, the second-biggest online
advertising platform with an expected 21.4 per cent share of the global market
in 2022, reports earnings on Wednesday. Its shares fell 2.5 per cent on Tuesday
after Alphabet’s results.
Increasing competition from companies such as Amazon. com
and ByteDance’s TikTok are chipping away at Google ad sales, too. Still,
retailers continue to pour money into ads and travel and entertainment
advertisers are ramping up again.
In addition, Google is better positioned than rivals to
withstand economic shocks because its advertising tools tend to be among the
last abandoned by advertisers as they are well known, easy to use and reach
more users than alternatives.
High on the list of risks faced by the company are numerous
lawsuits and investigations into whether Google has engaged in anticompetitive
conduct through its advertising and other businesses.
The latest scrutiny has been on its pending $5.4 billion
acquisition of cybersecurity services provider Mandiant, which the US
Department of Justice is reviewing closely. Google has said it still expects to
close the deal this year.
Google Cloud, the unit that would contain Mandiant,
increased revenue in the first quarter by 44 per cent compared with a year ago
to $5.82 billion. – Reuters
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