Google Search News: Google Search Ads Exceed Targets Despite Global ‘Uncertainty’

Google search ads pushed parent Alphabet Inc closer to Wall Street sales expectations on Tuesday, sending market share on relief that the world’s biggest seller of online advertising could better weather a global recession than its smaller rivals.

A trio of Alphabet executives sounded cautious on a call with investment analysts, using “uncertain” or “uncertainty” at least 13 times to describe the economy. YouTube ad sales grew at their slowest pace since disclosures began in 2018.

But investors focused elsewhere, including that second-quarter sales of the company’s biggest revenue stream — Google search — actually beat expectations. Alphabet shares jumped 5.5% in after-hours trading following the results.

“Despite a disappointing quarter, expectations were so low that investors breathed a sigh of relief,” said Jesse Cohen, senior analyst at

In contrast, shares of Snap Inc fell more than 25% last week after the company missed sales expectations and warned of a slowing ad market.

Alphabet executives said Google was not immune to the pullback, which was prompted by customers facing product shortages, falling demand and a variety of other factors. Rising wages as well as rising prices for fuel and other items have also forced some ad buyers this year to cut back on marketing.

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But Google has weathered the storms better than social media companies. It generates revenue through a wider variety of functions in the ad marketplace, and search ads can be cheaper for customers to generate because they are often text-only.

Customers sometimes prioritize search ads because the marketing is usually to people who are actively searching for related items, which generates better returns.

Travel and retail advertisers drove a nearly 14% increase in search ad sales for Google in the second quarter, which, at $40.69 billion, beat FactSet estimates of $40.15 billion.

Overall, Alphabet posted revenue of $69.69 billion in the second quarter, with 81% coming from Google’s advertising business, and nearly in line with the average expectation of $69.88 billion. dollars from investment researchers tracked by Refinitiv.

“Google is relatively well positioned to weather the choppy waters ahead of us,” said Insider Intelligence analyst Evelyn Mitchell.

Selling threats

Many factors have raised concerns about Alphabet’s prospects. Large US multinationals, including Alphabet, are bringing in less and less money when converting foreign earnings due to the strong dollar.

Alphabet said sales would have been close to $72 billion without currency fluctuations. About 55% of the company’s sales come from outside the United States.

The currency impact will be even greater in the third quarter, said Ruth Porat, Alphabet’s chief financial officer.

Amid scrutiny from antitrust regulators on five continents, Google is taking a smaller share of sales of apps developed by outside software makers. Users also spent less on apps in the second quarter, Porat said.

Other successes have come from Google suspending sales in Russia due to the war in Ukraine, and YouTube’s ad revenue fluctuates as its options for advertisers rise and fall in popularity.

Google Cloud sales of $6.3 billion missed analysts’ target of $6.4 billion and YouTube ads also fell short, hitting $7.3 billion against estimates of 7.5 billion, according to FactSet data.

Earlier this month, Google lost a major new business partner when Netflix Inc said it chose Microsoft Corp ad tech to help with its first foray into serving ads on its video streaming service. .

While investors are used to gross profit margins of up to 60%, Google, like many of its peers, has recently begun to slow hiring in certain units to better manage expenses.

But at the same time, Alphabet is forging ahead by expanding its cloud computing footprint, building new offices and bringing its Google Fiber internet service to new communities.

Alphabet’s second-quarter profit fell to $16 billion, or $1.21 per share, from an average estimate of $1.29 per share. Alphabet’s earnings tend to be unpredictable due to sporadic gains or losses – at least on paper – in the stakes it holds in many startups.

Alphabet shares had fallen more than 27% so far this year before quarterly results, more than the overall S&P 500 index. Alphabet split its shares 20-for-1 on July 15, briefly rising shares before the disappointing results of Snap and Twitter Inc only bring them down.

Meta Platforms Inc, which through Facebook and Instagram owns the second-largest online advertising service, reports results on Wednesday. Its shares rose nearly 3% on Tuesday after Alphabet’s results.