Winter is here.
Google parent Alphabet, the titan of the digital advertising industry, stumbled on Tuesday, reporting weaker-than-expected quarterly earnings and saying even the sector’s most entrenched businesses are struggling to navigate the difficult terrain ahead.
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Facing stiff competition from TikTok and a brutal economic headwind punishing the entire industry, YouTube also reported a decline in revenue of roughly 2% versus analysts’ expectations of a roughly 3% increase. It’s the first time YouTube’s ad revenue has fallen since Google began reporting earnings for the video-sharing site.
“Times like these are dawning,” CEO Sundar Pichai said on a call with analysts.
Yes, there are.
The lackluster quarterly earnings provide further evidence that the digital advertising industry is at risk as companies cut back on online ad spending as they try to cope with uncertainty over the global economy. The earnings also point to the surprising dominance of TikTok, which has begun to eat into the profits of Big Tech giants like Google.
Those bullish signs, after Snap’s poor earnings last week, sent other tech giants into negative territory in after-hours trading. Meta, which reports earnings on Wednesday, fell 4%. Snap was down 4%. And Pinterest was down 4%.
“When Google stumbles, it’s a bad omen for digital advertising in general,” said Evelyn Mitchell, principal analyst at Insider Intelligence, adding, “This disappointing quarter for Google means tough times ahead if market conditions continue to deteriorate.”