Daily Management Review

Alphabet's First-Ever Sales Drop Offset By Google Ad Revenue Growth


Google managed to avert its first quarterly drop in ad sale revenues in its 16 years as a public company as the company reported recovery of its ad sales have recovered after slumping in March at the height of the novel coronavirus pandemic, said Google’s parent company Alphabet on Thursday.
The results did not cause any change in the share price of Alphabet even though the company said that its revenue dropped by 2 per cent in the second quarter which was a lower decline compared to that had been predicted by analysts at 4 per cent for the quarter.
Previous occasions of recessions has seen Google struggle because revenues from ad sales account for about 78 per cent of its revenue, and that is the first area of cost cutting that companies implement during a downturn.
But buckling long believed notions of a slowdown in ad revenues during a downturn, Google and its online advertising rivals Facebook and Amazon reported better ad revenues even during the period of economic hit because of the pandemic.
Google had become a larger part of many consumers’ lives during the pandemic as they were entrenched at home because of stay at home orders and lockdowns imposed to prevent the spread of the pandemic, with the company’s mostly free tools for web browsing, video watching and teleconferencing being used extensively. People were forced to seek sources of entertainment at home primarily over the internet. This has made internet based media more attractive for advertisers compared to the traditional media of television, radio and other avenues.
“We saw the early signs of stabilization as users returned to commercial activity online,” Alphabet Chief Executive Sundar Pichai told analysts during a conference call on Thursday.
Alphabet Chief Financial Officer Ruth Porat told the analysts that the year on year growth of search ad sales for the company at the end of June were about flat which was an improvement compared to the decline in the preceding month of March which was in “mid-teens”.
Porat said that there was a 6 per cent growth in d sale on YouTube during the second quarter and the pace of growth was even faster in by late June. There was however a 120 per cent drop in sales of ads on partner properties. But Porat added that those were “improving somewhat toward the end of the quarter as advertisers’ spend began to return.”
The company reported a second quarter revenue of $38.3 billion which was the slowest growth for the company since the 2.9 per cent growth reported by the company in 2009 during the peak of thee global financial crisis.
Alphabet also announced a $28 billion boost to its share buyback program. Even while the company is implementing a cut in spending on real estate and other activities, hiring of a big class of recent graduates will still be done by it, the company said.
“What we’re looking at is really how to reimagine what the workplace will look like,” Porat said.