Google and YouTube disappoint after the pandemic

Posted 27 April, 2022

Alphabet, the parent company of Google, published Tuesday a net profit down and below market expectations, at 16.44 billion dollars (15.84 billion francs) for the first quarter, or 8% less than a year ago, when the online advertising giant had an exceptional quarter thanks to the pandemic.

At 68 billion dollars (65 billion francs), its turnover jumped 23% over one year but is also slightly lower than analysts' forecasts.

YouTube, especially, seems to have made little progress in a year. Ads on the video platform generated "only" $6.9 billion in the first quarter, not much more than last year's $6 billion.

In the mobile video consumption market, the ultra-popular platform TikTok "is now a major threat, and everything indicates that they will continue to gain users and generate more revenue", commented Paul Verna, an analyst at eMarketer, for AFP

"This factor, combined with current economic pressures, does not bode well for online advertising in general and for YouTube in particular," he added.

In particular, he mentioned inflation and difficulties in the global supply chain, which force advertisers "to manage budgets carefully".

YouTube took a stand in TikTok territory in March 2021 by launching YouTube Shorts, a very short format (less than 60 seconds).

These videos now generate "more than 30 billion daily views, four times more than a year ago", welcomed Sundar Pichai, the leader of Alphabet, during the conference call with analysts.

He said his engineers would, "as usual, focus first on creating a great user experience before working on monetization."




The boss also assured that, despite the resumption of activities suspended during the pandemic, “the time spent on YouTube continued to increase”.

However, a possible “post-pandemic hangover” should not be excluded, notes Paul Verna.

The big tech companies “admittedly didn’t celebrate, but the health crisis has boosted their business enormously,” he explained. “That kind of growth couldn't last. If we take this aspect into consideration, the results are not at all disastrous, Google remains a leader in search and very solid in the video.

Ruth Porat, the group's chief financial officer, acknowledged that Google's level of growth in 2021 had benefited from the comparison with 2020. The return to a more normal context is now working against it.

She said the comparison would be even “harder” for the current quarter, a period also affected by the closure of its commercial activities in Russia, linked to the war in Ukraine.

The action of the Californian group lost about 5% during electronic trading after the closing of the New York Stock Exchange.

But the company should “capitalize this year on the recovery of retail sales and the improvement of the supply chain, two market engines of online searches, of which Google holds a 59% share worldwide”, an estimated Paul Verna.


Cloud on the rise


Alphabet has also recruited with a vengeance: it now has nearly 164,000 employees worldwide, compared to 140,000 a year ago.

"We continue to invest cautiously (...) in research and development and talent to support the creation of long-term value for all our shareholders," said Ruth Porat, quoted in the results press release.

In early March, the company announced plans to buy cybersecurity firm Mandiant for around $5.4 billion, to bolster its cloud offering.

Google Cloud saw its revenue jump 44% to $5.8 billion.

It is the third-largest cloud service provider in the world. Its market share increased to 9% at the end of 2021, against 7% at the end of 2020, according to the research firm Canalys.

AWS (Amazon), the industry leader, accounts for 33% of global cloud spending, ahead of Azure (Microsoft) with 22%.

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