Google’s parent company Alphabet posted its first revenue decline in its history for the second quarter that ended in June 2020. This is most likely an impact of the global pandemic and resulting economic downturn on its core advertising business.
Alphabet’s revenue declined by 2% compared to the second quarter of 2019, reporting earnings of about $38.3 billion. However, its revenue still beat the $37.4 billion revenue that Wall Street analysts predicted.
“We continue to navigate through a difficult global economic environment,” Alphabet CFO Ruth Porat said in the earnings report.
Advertising revenue on Google’s platforms declined by 8% to $29.9 billion during the period. Additionally, the company recorded almost a 10% drop in Google Search advertising revenue. YouTube ad sales, however, increased by almost 6%.
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The CFO also told analysts that ad spending had begun to improve towards the end of the quarter. This probably signifies things going back to normal.
“We saw a gradual return in user search activity to more commercial topics throughout the quarter, followed by an increase in spending by advertisers. This resulted in an improvement in year-on-year search revenue trends during the quarter, with search revenues essentially flat to last year by the end of June,” Porat said.
Porat however notes that the company may not yet be “out of the woods” regarding ad sales. This is because a new surge in coronavirus cases and further shutdowns across the US could cause more advertisers to cease their improving ad spending.
The reports also showed that Alphabet saw its revenue from Google Cloud, which competes with Amazon Web Services and Microsoft Azure, grow by 43% from 2019 to more than $3 billion. Its self car driving division Waymo and Sidewalk Labs posted profits too. Alphabet, however, posted a $1.1 billion operating loss during the quarter for its other bets.
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