Alphabet misses revenue target in Q1 2022, the first time since Q4 2019
By Jeph Ajobaju, Chief Copy Editor
Chinese upstart TikTok has in a big way taken on American behemoth Google with 30 billion views per day in the first quarter of 2022 (Q1 2022), double its traffic in Q4 2021 and quadruple the figure for full year 2021 (FY 2021).
The impact is being felt in the revenue of YouTube owned by Google and by Alphabet the parent company of Google.
Alphabet said sales rose to $68.01 billion, up 23 per cent from last year but below the average estimate of $68.1 billion among financial analysts tracked by Refinitiv, its first miss since Q4 2019.
Notably, YouTube advertising sales of $6.9 billion missed analysts’ target of $7.5 billion, according to FactSet, per reporting by Reuters.
Alphabet reported its first quarterly revenue miss of the pandemic after the war in Ukraine hurt YouTube ad sales, leaving investors rattled as the global economy sputters.
The world’s largest provider of search and video made a fortune over the last two years as the pandemic forced more shops and people online.
But outdoing those sales is proving difficult so far this year with the war, rising inflation and product shortages causing advertisers to dump marketing campaigns, according to analysts.
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Impact of Russian-Ukrainian war
Alphabet Chief Financial Officer Ruth Porat said it was too early to predict when sales slowed by the war may pick up and warned that the strengthening U.S. dollar would hurt sales even more in the current quarter.
Alphabet shares, which were up nearly 90 per cent over the past two years, fell about 2.5 per cent after the results late on 26 April. They had dropped 3.6 per cent during the regular session.
David Wagner, portfolio manager at Aptus Capital Advisors, voiced growing concerns about the macro environment. “Alphabet has been seen as one of the most insulated companies in the advertising space relative to peers, but sometimes you can still own the best house in the worst neighborhood,” he said.
Porat said the war in Ukraine that began during the quarter had an “outsized impact” on YouTube revenue because the company stopped ad sales in Russia and brand advertisers, particularly in Europe, pulled back on spending after fighting broke out. read more
Google overall derived 1 per cent of its sales in 2021 from Russia, Porat said.
The missed opportunities come as TikTok captures an increasing share of the social media video market.
Porat said on an analyst conference call that direct response ads experienced ‘modest growth’. “The deceleration is largely a result of the strong first quarter of 2021,” she explained, per reporting by Nairametrics.
Other highlights of the result
- As more big enterprises migrate their workloads to the cloud, Google’s cloud business grew by 44 per cent and surpassed estimates.
- Yet, the cloud division still lost money, generating a $931 million operating loss in comparison to $974 million a year ago.
- The invasion of Ukraine halted Google’s Russian operations in Q1 2022. In the European region, including the Middle East and Africa, revenue growth slowed to 19 per cent from 33 per cent in Q1 2021.
- With revenues of $440 million from $198 million, Alphabet’s other businesses, which include life sciences businesses and self-driving car unit Waymo, increased nearly twofold. There was a slight increase in losses to $1.15 billion for the unit.
- The company reported $11.99 billion in traffic acquisition costs, the metric used to show how much it paid other websites to acquire traffic.
- Google generated $6.81 billion in other revenue, including revenue from hardware, the Play Store, and non-advertising YouTube videos.
