After a rocky end to 2022 and first few months of the year, the Google money-making machine is back in cruise control.
Alphabet made $74.6 billion in Q2 2023, up from $69.7 billion in revenue a year ago – and profitability jumped from $16 billion to $18.4 billion during the same timeframe.
But the six months preceding the second quarter were far less kind to Google.
Its profitability slipped, its core search and ad services were flat and YouTube revenue didn’t simply slow down, but actually experienced a year-over-year decrease.
YouTube’s growth in Q2 was modest at beast. YouTube ads grew by only $300 million YoY, to a total of $7.7 billion.
Still, Google is clearly breathing a major sigh of relief about what Chief Business Officer Philipp Schindler referred to as the “further stabilization in advertiser spend.”
Investors on Alphabet’s Q2 earnings call Tuesday appeared satisfied that YouTube and the search ads business in general are back on track. And so their attention, unsurprisingly, turned to the potential opportunities for generative AI.
But Google’s executives didn’t explore hypothetical avenues, like how Bard might eventually incorporate brands into search responses. Instead, Google focused on the here and now.
“Generative AI is supercharging existing ads products with tons of potential,” Schindler told investors.
Emphasis on “existing.”
He cited a conversational chat ad product launched in May, which is backed by Google’s generative AI tech. The same AI is also being used to generate dynamic search copy for some advertisers, to create and optimize creative for Performance Max campaigns and to support a new feature called Product Studio that autogenerates creative for small merchants and ecommerce sellers.
One investor asked how Google’s ad revenue was able to bounce back so quickly while many other publishers, broadcasters, agency holding companies and ad tech companies continue to see flat or decreased revenue.
The macro backdrop hasn’t change, he said, so why is Google growing?
Google’s biggest growth drivers in Q2 came from the retail vertical and an uptick in brand advertising on YouTube, responded CEO Sundar Pichai.
But in an economic downturn, businesses also look for efficiency over all else, he said.
Other companies are focused on profitability – an imperative given the grim economic conditions.
“Our goal is to maximize efficiency,” Pichai said, “and we have the proven tools to do it.”
