Google CEO Sundar Pichai has been on a belt-tightening mission at Google for the past three months, so it looks like he saw it coming: parent company Alphabet’s latest revenue is something of a disaster . The company’s results for the third quarter of 2022 were released last night, and they show a 27% drop in profits from a year ago, with earnings and revenue weaker than expected.
Revenue increased 6% year-over-year to $69.1 billion, a sharp decline in growth from the third quarter of 2021, which saw 41% growth. Profits were $13.9 billion, compared to $18.9 billion in the third quarter of 2021. As usual, Alphabet’s revenue is primarily driven by Google ad revenue and click-through rates, the company citing reduced spending from “insurance, lending, mortgage, and crypto sub-categories.” especially. Worries about the economy and inflation are causing many Google customers to cut their advertising budgets.
Alphabet doesn’t break down non-advertising business in detail, but the two biggest losers in Alphabet’s reports are the “Other Bets” section and Google Cloud. Other bets lost $1.6 billion, more than the loss of $1.29 billion a year ago. “Other Bets” is the “non-Google” part of Alphabet and includes long-term R&D projects like Waymo self-driving cars and the “Wing” drone delivery project. Google says the only significant revenue generators for Other Bets are “health technology” projects – i.e. Verily and/or Calico – and “internet services”, aka Google Fiber.
The other big loser is Google Cloud, which lost $699 million this quarter, down from $644 million in Q3 2021. “Google Cloud” in the earnings report combines the combat infrastructure business of Amazon Web Services and Google Workspace’s suite of productivity apps like Gmail and Google Docs. Workspace definitely makes money by serving ads to its 3 billion users, charging for user storage, and charging businesses for Gmail accounts with custom domains. The infrastructure business – Google Cloud Platform – is growing, but it’s still struggling as the No. 3 cloud provider behind Amazon and Microsoft. Google is taking a “longer-term path to profitability” with Cloud Platform.
Sundar Pichai has been preparing for this report all quarter. Saying that Google’s productivity is “not where it needs to be,” Pichai has slowed hiring since August, revamped the employee evaluation process and said the company should be “more productivity-focused.” mission” and “20% more efficient”.
The Google Grim Reaper also exercised; Google Hardware’s laptop division was shut down, the experimental “Area 120” group was forced to scrap half of its projects, the remnants of Project Loon were moved to a separate company, and Google Stadia was shut down. YouTube tried (and rolled back) a series of revenue-boosting experiments, such as adding 10 non-skippable pre-roll ads to videos and charging for 4K resolution, but it looks like the change will stick. a 27% price increase for YouTube. Premium family plans. The latest rumor is that Google Assistant, which does not generate significant revenue, will have to reduce support for various hardware platforms.
Google has hope for the future, however, with the company’s finance officials repeatedly highlighting plans to roll out ads on “YouTube Shorts” later this year. For the first time in a long time, YouTube is facing serious competition from a rival video site – TikTok – and YouTube Shorts is a direct clone of this service. Shorts’ monetization plan also includes ad revenue sharing from creators in 2023, when the small YouTube video site will be fully operational.
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