Google-owner Alphabet posted lower net income for fourth quarter 2022, and a smaller revenue increase, as the tech behemoth sees a decline in online ad spending, coming at a time when employee unions are criticizing the firm for firing thousands of workers.
Total acquisition costs for fourth quarter 2022 were $12.93 billion, down 3.7 percent from $13.43 billion in fourth quarter 2021. Total income from operations during this period fell from $21.89 billion to $18.16 billion, a decline of 17 percent.
“We’re on an important journey to reengineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet,” said Sundar Pichai, CEO of Alphabet and Google.
Declining Ad Revenues
Advertising revenue numbers from Google were seen as disappointing by some investors. Revenue from Google advertising, which includes search and YouTube, fell 3.6 percent, to $59.04 billion, during the fourth quarter from $61.24 billion in the year-ago period. Though total revenue rose, it was the smallest-ever growth, except for second quarter 2020.YouTube ad revenues, which is a consistent revenue generator for Alphabet, fell to $7.96 billion in the quarter from $8.63 billion, a decline of 7.76 percent.
“Despite being seen as one of the most insulated companies in the advertising space relative to peers, Alphabet’s poor quarter is the latest sign that worsening fundamentals and a tough macroeconomic environment are prompting advertisers to cut back on spending,” said Jesse Cohen, senior analyst at Investing.com.
During a call with analysts, Pichai admitted that the more modest spending by advertisers was one of the factors that dragged down company results. Advertisers have scaled down ad spending due to concerns about consumer spending amid an environment of elevated inflation and high interest rates.
Falling ad revenue has been a theme of other major online platforms as well. Meta Platforms, the second-largest digital ad platform in the world after Google, posted its third consecutive quarter of year-over-year revenue fall in its fourth-quarter results.
Meta blamed lower ad spending from companies in the tech and financial services sectors as a reason for the decrease in revenue. Snap, which owns Snapchat, expects revenues to fall by up to 10 percent due to a challenging economy and competition.
Layoffs
Earlier last month, the company announced a workforce reduction of roughly 12,000 roles. Alphabet expects to incur costs of $1.9–2.3 billion as employee severance and related charges, the majority of which is expected to be recognized in first-quarter 2023 results.“It is clear that the menial savings the company is pocketing from laying off workers is nothing in comparison to the billions spent on stock buybacks or the billions made in profits last quarter,” Alberta Devor, a member of the union, said in a statement.
“We are outraged that our colleagues unceremoniously lost their livelihoods while Google continues to remain extremely profitable. That is why we are standing here together to demand Google prioritize transparency and its workers over shareholder profits.”