Google's Advertising Haul Comes Up Short for First Time -- 2nd Update
July 30 2020 - 6:46PM
Dow Jones News
By Rob Copeland
The global pandemic dealt a rare losing hand to Google's
venerable digital advertising operation, pushing quarterly revenue
down compared with a year earlier for the first time in company
history. ( Tech giants Amazon, Apple, Facebook and Google reported
earnings. Follow our coverage for results and analysis. )
The search-engine giant posted a $2.6 billion drop in
advertising for the second-quarter from a year earlier, as some of
Google's biggest advertisers, including travel companies and
consumer brands, cut back on spending amid economic
uncertainty.
In all, Google's parent, Alphabet Inc., reported advertising
revenue of $29.9 billion for the three months through June. That
metric, which includes ads on Google's own properties as well as
those placed on other websites, fell short of the $32.5 billion
haul a year earlier. The weakness appeared to have been driven
mostly by Google's traditional venues such as search; the YouTube
video unit, for instance, posted a modest rise in revenue. Google's
advertising revenue had risen every quarter of the company's
22-year history, so the reversal is notable. Analysts polled by
FactSet had expected the drop in advertising revenue, and investors
were mostly undisturbed. Alphabet shares rose about 1% in
after-hours trading.
Alphabet Chief Executive Sundar Pichai blamed the macroeconomic
environment caused by the coronavirus pandemic, and said he saw
early signs of potential stabilization. The conglomerate reported
total profit of $6.4 billion, a steep drop from a year earlier.
Alphabet's margin was crimped as well, down to 17%, from 24% a year
earlier.
The malaise ate into Alphabet's enviable cash hoard. Alphabet
has modestly drawn down what was an $18.5 billion cash position in
January. It now stands at $17.7 billion.
On the regular call with analysts, executives said advertising
had steadily improved throughout the quarter. They were loath,
however, to proclaim victory. "We do believe it's premature to say
we are out of the woods," said Chief Financial Officer Ruth
Porat.
The pandemic seems to have landed harder at Google than at some
of its Big Tech peers. A few minutes before Google disclosed its
figures, Amazon.com Inc. said its sales and profit soared in the
second quarter as shoppers inundated the company's site with orders
and employees worked from home. And while Facebook Inc. posted
diminished growth for the second quarter, the stock surged as
revenue came in higher than expected and the social-media giant
benefited from higher engagement from users amid the pandemic.
Google has more immediate pressures than its neighbors, too. The
company, based in Mountain View, Calif., faces multiple antitrust
investigations into whether its dominant business harms consumers.
The company broadly denies that. U.S. prosecutors are expected to
file charges against the company as soon as this summer, The Wall
Street Journal has reported.
Mr. Pichai was among executives to testify remotely for Congress
on Wednesday, where he faced questions about whether the search
platform had cut off traffic to potential competitors. "The
scrutiny is going to be here for a while," he said Thursday.
The company continues to hammer into new markets, including
cloud computing, which posted a 43% rise in revenue and merited
several mentions in Mr. Pichai's remarks. That growth is slower
than the cloud businesses at some of Google's larger peers.
Microsoft Inc.'s cloud division Azure -- more than four times the
size of Google's by revenue -- grew 47% in the most recent quarter,
the company said last week.
Google boasts roughly 200,000 full-time and contract employees,
including thousands added this year. Mr. Pichai said earlier this
week that most employees, including those in the U.S., would be
instructed to work from home until at least next summer. On
Thursday's earnings call, executives nodded to that decision,
saying the company would slow purchases of new offices.
Ms. Porat said the company remained in the process of
"reimagining the optimal work environment."
Write to Rob Copeland at rob.copeland@wsj.com
(END) Dow Jones Newswires
July 30, 2020 18:31 ET (22:31 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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