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YouTube giant advertising revenue lower than expected

YouTube has been one of Google's main sources of income during the pandemic, with people stuck at home watching far more videos. The increase in revenue from the service turned out to be a double-edged sword: the company has to work harder and harder to keep the bar high.

The most glaring disappointment in Google's latest quarterly report was YouTube: the service's advertising revenue grew just 4.8% year-on-year to $7.3 billion versus the $7.52 billion forecast by analysts. This is the lowest growth rate for YouTube since its owner, Alphabet, started increasing sales in the fourth quarter of 2019. Last year, growth was 84%, and in 2020 – just 5.8%, when professionals marketing departments reduced promotion costs with the onset of the pandemic.

During the financial report, Alphabet's management did its best to emphasize the anomalous nature of last year's results, trying to reassure investors and convince them that the slowdown in growth will not be long-term. And here the company should have been more careful with its promises: Last week, Snap disappointed investors with its quarterly results, demonstrating that in the face of current economic uncertainty, advertisers are spending their budgets more carefully. Google's top managers partially agreed with this position, but didn't mention another problem – competition.

In recent months, the company has increasingly noticed the growth in popularity of the short video format in general and TikTok in particular. Recently, Google Senior Vice President Prabhakar Raghavan claimed that up to 40% of the younger generation start their web search not with Google but with TikTok and Instagram*. This isn't the first time that insufficient YouTube revenue has become a problem for Alphabet: in the first quarter, advertising revenue on the platform also fell short of analysts' expectations - so the company said it was pinning its hopes on the YouTube section. Shorts, which is a direct competitor to TikTok. The project's problem is that it doesn't have a well-established monetization program: users are increasingly choosing a new format, and the platform is just testing ways to make money from it.

AVnews