Google Search Ads Exceed Revenue Expectations Despite ‘Low Expectations’

A logo of Google at its exhibition space, at the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris on June 15, 2022. Benoit Tessier/Reuters

Google’s second-quarter revenue from its search advertisements beat expectations, enabling parent company Alphabet to report revenues in line with market forecasts.

Alphabet’s second-quarter 2022 revenue from “Google Search & Other” came in at $40.69 billion, up 13.53 percent from second-quarter 2021 revenue of $35.84 billion. It also beat financial data firm FactSet’s estimates of $40.15 billion. Revenue from YouTube ads rose, from $7 billion to $7.34 billion, while revenue from Google Network increased, from $7.60 billion to $8.26 billion during this period, according to second-quarter results published on July 26.

Alphabet’s overall revenue from Google advertising rose, from $50.44 to $56.29 billion, an increase of 11.6 percent.

Of the $69.69 billion in total revenue reported by Alphabet, 81 percent came from Google’s ad business. This was also in line with market expectations of $69.88 billion, according to data by Refinitiv.

“Despite the underwhelming quarter, expectations were so low that investors blew a sigh of relief,” said Jesse Cohen, senior analyst at Investing.com, in a Reuters article.

Alphabet executives had warned that Google was not immune to the economic pullback. However, Google search ads are said to be better positioned to weather the uncertain market because they tend to be less expensive for ad buyers.

In addition, search ads are directed at people searching for a specific term, producing better results and adding to the incentive to publish ads via Google search. Alphabet CEO Sundar Pichai attributed the company’s second-quarter performance to be driven by “Search and Cloud.”

“The investments we’ve made over the years in AI [artificial intelligence] and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term,” Pichai said.

Online Ad Sector

The Google Search ad results came following a spate of dismal performance by other tech companies offering online advertising.

Snap Inc., the developer of Snapchat, for example, reported only a 13 percent increase in revenue for the second quarter, the slowest growth rate in the company’s history. Net loss was reported at $422.1 million, a massive jump from the $151.7 million net loss reported a year back.

In a call with analysts, Jeremi Gorman, Snap’s chief business officer, said that digital ad spending is “definitely easier to turn off.” In an economic slowdown, digital companies tend to be the first to suffer negative effects because customers can easily switch off spending. Other ad channels like TV commercials are much harder to scale down or cancel immediately.

“So, as companies are reevaluating their priorities and their cost structure, they are looking at things like digital ad spend,” Gorman said, according to the Wall Street Journal.

Twitter’s second-quarter revenue declined by 1 percent year over year. The company blamed “advertising industry headwinds associated with the macroenvironment” as one of the reasons for the poor performance.