Alphabet Inc., parent company of Google, missed market
estimates for quarterly revenue on Tuesday as advertisers cut back on their
spending in the face of an economic slowdown. The company reported
weaker-than-expected earnings and revenue for the third quarter and said it
would significantly decrease headcount growth.
Revenue growth slowed to 6% from 41% a year ago as the
company struggles with a continued downturn in online ad spending. YouTube ad
revenue fell around 2% to $7.07 billion from $7.21 billion a year ago.
Phillip Schindler, Google’s chief business officer, said
the company saw a pullback in spending on search ads from crypto companies and
other financial firms, which led to a slowdown in revenue growth.
“In the third quarter, we did see a pullback in spending by
some advertisers in certain areas in search. For example, in financial
services, we saw a pullback in the insurance, loan, mortgage, and crypto
subcategories,” Schindler said.
Google’s overall ad growth of 6% in the reported quarter
was the weakest for any period since 2013, except for one quarter at the
beginning of the pandemic.
The “challenging macroeconomic climate” is having an impact
on Google’s ad business, said CEO Sundar Pichai.
Schindler mentioned the crypto pullback twice, but he
didn’t provide any additional information. The crypto sector has been shattered
in 2022, as investors have avoided risky assets and sold out of digital tokens
and the related stocks that they bid up in the earlier couple of years.
Bitcoin and Ethereum have both plunged over 60% this year.
Crypto exchange Coinbase, which went public in 2021, has lost nearly 70% of its
market value. The cryptocurrency industry has been plagued by bankruptcies as
hedge funds and lenders saw their liquidity dry up and some were forced to
default on debt. Three Arrows Capital, Celsius Network, and Voyager Digital are
some of the more notable names that were forced into bankruptcy.
In addition, several companies have downsized. Blockchain
.com sacked 25% of its workforce in July, Coinbase laid off 18% of its staff
the previous month, and Crypto .com has undertaken two rounds of layoffs this
Google sees clear opportunities for growth in the future
amid hopes that the crypto sell-off represents just a short-term blip.
Earlier this month, Google said it will collaborate with
Coinbase to start allowing customers to play for cloud services with
cryptocurrencies in 2023. Additionally, Coinbase will shift data-related
applications to Google’s cloud infrastructure from Amazon Web Services, which
the company has used for years.