Google’s Q4 results fell short in nearly all areas, marking the start of a challenging era for the internet giant. Despite YoY growth of 1% to $76.05B, revenue was below the projected $76.5B. Advertising revenue saw a decline, with YouTube ad revenue at $7.96B instead of the expected $8.25B, a YoY drop of nearly $700M in Google Search revenue, and over $800M YoY decrease in Google Network revenue. The bright spot was Google Cloud, which saw a 32% rise in revenue, contributing significantly to the company’s Q4 gains.
Google emphasized growth opportunities in various sectors, including AI as a key focus, as per CEO Sundar Pichai. He noted growth in areas such as YouTube subscriptions, Google Cloud, and Pixel. Alphabet’s Chief Business Officer, Philipp Schindler, announced new CTV advertising tools to accompany their recent NFL Sunday Ticket agreement. Despite a challenging Q4 report with 12,000 job cuts and slowing hiring amid rising interest rates and legal challenges, Alphabet CFO Ruth Porat assured that the company is well-positioned for future growth.
Google faces challenges in pursuing unlimited growth due to its dominant position as the world’s largest search engine and recent legal controversies. The company has received fines from the EU for anti-competitive practices and privacy violations and is facing a lawsuit from the US Justice Department for alleged monopolization of digital advertising. In response to regulatory pressure, Google has made concessions, such as permitting third-party ad exchanges on YouTube, to avoid legal action.
Poor performance from a behemoth like Google will impact its entire industry. Analyst Evelyn Mitchell from Insider Intelligence stated, “Google ended the year in a different position than it was in the previous year.” Even search revenue, which is usually protected from ad spending decreases, saw a decline. These results are a concerning sign for the rest of the digital advertising industry. It is projected that US search ad spending will only increase 7.4% in 2023, down from 16.9% in 2022.