Original Article By Luc Olinga At TheStreet.com
Alphabet (GOOGL) – Get Alphabet Inc. Class A Report, parent company of Google, was one of the big beneficiaries of the economy of the Covid-19 pandemic. The firm has indeed taken advantage of the restriction measures which have forced millions of consumers to stay at home and communicate or stay in touch with the rest of the world mainly via technology.
But with the reopening of economies and the return of employees to the office, the situation seems to have changed. In any case, this is the message sent by Alphabet when it published its first quarter results.
Revenues have certainly increased by 22.95% to $68.01 billion compared to the first quarter of 2021 but they are below the expectations of financial analysts, who anticipated $68.05 billion. However, the rate of growth is slower than a year ago. In the first quarter of 2021, revenues had indeed increased by 34%.
Alphabet posted net profit of $16.4 billion, down 8.33% year-on-year.
Slow Growth at YouTube
What is interesting is the performance of YouTube. The platform’s revenue increased 14.4% to $6.87 billion compared to the 2021 first quarter. But it is significantly lower than the $7.21 billion that were anticipated by analysts.
The disappointment was such that the action fell more than 5% in electronic trading following the close of the session on Wall Street.
The video platform was indeed running at full speed with the pandemic. Blocked at home, people had turned to the platform and others to try to forget everyday life and brighten up their days. The pandemic also pushed many companies toward e-commerce. To distinguish themselves, these companies heavily turned to Google, Facebook and now TikTok to target potential customers. The pandemic was a bonanza for online ad platforms.
But the reopening of the economy alone does not explain this slowdown in growth. It seems that YouTube also suffers from the success of TikTok whose growth is attracting more and more advertisers.
It is difficult to know if the situation will improve because advertisers are rethinking their marketing strategy in the face of inflation, rising commodity prices, fears of recession and the shortage of many products due to disruptions in supply chains.
To this was added the Russian war in Ukraine, which is now in its third month. This conflict led Alphabet and other multinationals to suspend activities in Russia. It had an “outsized impact” on YouTube revenue, Chief Financial Officer Ruth Porat explained to analysts during the earnings’ call.
What’s Next for Facebook?
YouTube stopped ad sales in Russia and brand advertisers, particularly in Europe, pulled back on spending.
These difficulties encountered by YouTube are a foretaste of what Facebook (FB) – Get Meta Platforms Inc. Class A Report should in turn tell investors when publishing its results on April 27. The situation could be worse for Mark Zuckerberg’s group. Facebook and its platforms — WhatsApp and Instagram — were banned in Russia after the firm took strong action against Vladimir Putin’s regime following its invasion of Ukraine.
In addition, Facebook warned in January that it anticipated $10 billion in lost revenue for 2022 because of the in-app tracking blocked by Apple device users.
Facebook shares thus fell by more than 3% after the close.
Google, Facebook and Amazon (AMZN) – Get Amazon.com, Inc. Report together accounted for 74% of global digital ad spending last year, which is 47% of all money spent on advertising over that period, according to Digiday.com. That put them on track to reach a dominant share of the entire advertising market this year.
Google is expected to grab 29%, or the leading share, of the $602 billion global online ad market in 2022, according to Insider Intelligence. Facebook, now known as Meta Platforms, will come in second with an expected 21.4% share of the global market in 2022.