The Pandemic Flattened Alphabet’s Revenue

Google revenue Q2 20202
The coronavirus pandemic slashed Alphabet’s growth rate from 22% last year down to zero in Q2 2020.

Revenues totaled $38.3 billion vs. $38.9 billion the year prior – a 2% year-over-year decline, or 0% once constant currency is taken into account.

Like many of its advertising revenue-dependent peers, Google reported steady improvement throughout the quarter.

Google’s network business across publishers, for example, began to rebound at the end of Q2 and saw further improvement after the quarter ended, in the first few weeks of July. But the network advertising business declined 10% to $4.7 billion.

YouTube’s brand spending returned toward the end of the quarter, though direct response advertising demand remained strong throughout. Overall YouTube revenues grew 6% year over year to $3.8 billion, the only advertising category to show growth.

Search revenues improved as people started searching again for more monetizable topics through the quarter, but declined overall 10% to $21.3 billion during Q2.

CFO Ruth Porat said she was optimistic about the company over the long term – but wasn’t willing to extend that optimism to the company’s short term.

“We think it’s premature to gauge the durability of recent trends given the uncertainty of the global macroeconomic performance,” Porat said, calling that broad metric a “key signal to monitor” given how closely it correlates to ad spend.

Most of Google’s bright spots weren’t advertising related. For example, its Google Cloud business grew, as did YouTube subscriptions and revenue from the Google Play store. All of these improvements helped Alphabet’s overall revenue stay essentially flat.

Alphabet CEO Sundar Pichai emphasized how the pandemic has made the world more digital, in everything from online learning to ecommerce. Google is making inroads into online commerce with its “buy on Google” feature and focus on online shopping – as well as Google Maps features such as a focus on curbside pickup.

One analyst on the call, RBC Capital Markets’ Mark Mahaney, questioned Google’s strengths in online commerce given its results paled in comparison to Amazon and Shopify.

Alphabet didn’t see an outsize bump in revenue from ecommerce results because it serves brands with a wide variety of brands and services, including hard-hit categories such as travel, Pichai said. “Our strength comes from our diverse categories.”

Enjoying this content?

Sign up to be an AdExchanger Member today and get unlimited access to articles like this, plus proprietary data and research, conference discounts, on-demand access to event content, and more!

Join Today!