Today’s Cache | Google’s subpar quarter

Today’s Cache is a column on the happenings in the world of tech and corporations.

Published - April 27, 2022 05:02 pm IST

Google parent Alphabet Inc on Tuesday reported first-quarter revenue below expectations, missing Wall Street targets and ad sales. The Silicon Valley giant was also hit by supply-chain pressures, inflation concerns and the war in Ukraine.

Youtube was the company’s weakest link. The streaming service’s advertising sales stood at $6.9 billion, missing Wall Street’s target of $7.5 billion, according to some estimates. The company’s chief business officer Philipp Schindler said YouTube’s direct response ads grew more moderately during the quarter.

The tepid growth seems to be result of Apple’s anti-tracking feature. Google said Apple’s privacy changes had a small impact on its video site earlier, but on Tuesday, its executives noted that YouTube saw a slowdown in growth of direct-response ads, the marketing formats that use targeting to reach consumers.

Apple‘s privacy-enhancing feature has upended social media companies by putting tight restrictions on third-party ads on iPhones. The move hit Facebook and Instagram, and other mobile-centric social networks. While this left Google relatively insulated due to its less reliance on targeted ads, its sibling Youtube has been hit by the iPhone maker.

Google executives also attributed some of YouTube’s troubles to Russia’s invasion of Ukraine. The political unrest led to a “pullback” in spending across Europe, according finance chief Ruth Porat. During the quarter, the company’s overall sales in Europe and the Middle East grew 19% compared with 33% the prior year.

Alphabet said first-quarter sales were $68.01 billion, 23% higher than last year but below the average estimate of $68.1 billion according to some financial analysts, its first miss since the fourth quarter of 2019 before the pandemic. Alphabet’s total costs also increased 23%.

Analysts note Google’s ad sales were in line with expectations overall, but that YouTube’s advertising growth was less than expected. 

Cloud sales grew at a slower pace than a quarter ago, and Google’s “other” revenue, which includes app, hardware and subscription sales, were $6.8 billion, below estimates of $7.3 billion.

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