Google’s advertising business has declined for two consecutive quarters

In the recently released financial results for the first quarter of the 2023 fiscal year, Alphabet, Google’s parent company, reported revenues of $69.787 billion, a 3% increase compared to the same period last year, with net profits reaching $15.051 billion. Despite advertising revenue experiencing a decline for two consecutive quarters, Google Cloud has, for the first time, achieved profitability and halted its losses.

Financial reports reveal that Google Cloud’s revenue in the previous quarter reached $7.454 billion with a profit of $191 million, a significant improvement compared to the same period last year, which saw $5.821 billion in revenue and a $706 million loss. Although it still lags behind Amazon AWS and Microsoft Azure in terms of scale, Google Cloud’s development has at least begun to yield positive results.

However, Google’s advertising revenue in the previous quarter totaled $54.548 billion, compared to $54.661 billion during the same period last year. This less than 3% decline marks the second consecutive quarter of falling revenue for Google’s advertising business and the third such decline since the company’s 2004 IPO.

Nevertheless, Alphabet and Google CEO Sundar Pichai maintains that Google Search continues to perform well and emphasizes the company’s commitment to enhancing search capabilities to strengthen its competitive position in the market.

Although Google Search still commands a market share of over 90%, some believe that the increasing prevalence of auto-generated AI applications and Microsoft’s continued focus on its search business—potentially replacing Google as Samsung’s default search engine provider—may have a more significant impact on Google.

Additionally, even as Google concentrates its resources on AI technology, including “Bard,” market concerns persist that the company’s technological edge will gradually diminish, thereby affecting the growth of its advertising business.

Google’s advertising business is also impacted by the overall economic uncertainty, leading many advertisers to reduce their ad budgets, which in turn affects companies reliant on ad exposure for revenue, including Google. Coupled with revenue declines in other investment projects, such as life sciences division Verily and autonomous vehicle company Waymo, Google has reportedly postponed its expansion plans for an office park in San Jose, California, and intends to cut employee benefits and equipment costs.