# Alphabet’s miss fans inflation fears across digital advertising
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-26
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Alphabet's Ad Sales Disappoint: Impact on Digital Media
Meta Description: Analysts raise concerns as Google's ad revenue falls short, impacting digital media sector amid economic slowdown. Alphabet's poor results shake Wall
URL: https://financedigest.com/alphabets-miss-fans-inflation-fears-across-digital-advertisinghtml

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By Sheila Dang and Eva Mathews

(Reuters) -Google parent Alphabet Inc’s disappointing ad sales sparked worries across the digital media sector on Tuesday as advertisers cut back on their spending in the face of an economic slowdown.

Alphabet called out slowing spending by advertisers on YouTube, said financial services spending was cooling on Google, and plans to cut hiring by more than half.

The negative results shattered many expectations that Google, which is the [world’s largest digital](https://www.financedigest.com/fraud-in-a-mobile-digital-world.html "FRAUD IN A MOBILE DIGITAL WORLD") advertising platform by market share, would remain strong in a weakening economy and reinforced worries on Wall Street that inflation will continue to hurt advertising spending. Last week, [smaller rival Snap Inc’s slowest-ever revenue growth rate sent inflation fears](https://www.financedigest.com/uk-economy-set-for-smaller-hit-in-2023-than-previously-feared-imf.html "UK economy set for smaller hit in 2023 than previously feared – IMF") through tech sector and temporarily wiped out $40 billion in market capitalization.

[Shares in Alphabet fell 6.5% in trading](https://www.financedigest.com/social-trading-is-the-new-way-that-gen-z-are-getting-their-share-of-the-pie.html "Social Trading is The New Way That Gen Z Are Getting Their Share of The Pie") after the bell.

Alphabet’s weak results raises concerns for other companies in the sector, especially advertising-dependent [Meta Platforms](https://www.financedigest.com/meta-to-wind-down-nfts-on-platforms-amid-crypto-bust.html "Meta to wind down NFTs on platforms amid crypto bust"). The Facebook parent, which reports results on Wednesday, saw [shares drop](https://www.financedigest.com/ford-posts-lower-profit-issues-downbeat-outlook-shares-drop.html "Ford posts lower profit, issues downbeat outlook; shares drop") 4.5% on Tuesday.

Ruth Porat, Alphabet’s chief financial officer, said the deceleration in overall advertising revenue was due to last quarter’s “very [strong performance,” adding that lower ad sales](https://www.financedigest.com/indias-tata-motors-jumps-to-a-7-month-high-on-strong-q4-jlr-sales.html "India’s Tata Motors jumps to a 7-month high on strong Q4 JLR sales") on YouTube were due to some advertisers pulling back on their ad spending.

Companies that slowed ad spending included those in [financial services](https://www.financedigest.com/devops-the-secret-tool-thats-transforming-financial-services.html "DevOps: The Secret Tool that’s Transforming Financial Services") such as insurance, mortgages and cryptocurrencies, Alphabet said. Travel and retail advertisers helped [Google Search](https://www.financedigest.com/your-phone-number-on-google-search-giant-now-takes-removal-demands.html "Your phone number on Google? Search giant now takes removal demands") ad revenue.

Google’s advertising revenue was $54.48 billion in the [third quarter](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter"), compared with $53.13 billion last year but came in below analysts’ expectations.

The company said total revenue was $69.09 [billion in the quarter ended](https://www.financedigest.com/td-other-banks-reach-1-35-billion-settlements-to-end-stanford-litigation.html "TD, other banks reach .35 billion settlements to end Stanford litigation") Sept. 30, [compared with $65.12 billion a year](https://www.financedigest.com/glastons-interim-report-1-january-31-march-2018-orders-received-grew-23-comparable-operating-profit-at-previous-years-level.html "Glaston’s Interim Report 1 January – 31 March 2018: Orders received grew 23%, comparable operating profit at previous year’s level") earlier.

Analysts on average [expected revenue](https://www.financedigest.com/russias-gazprom-expects-increase-in-2022-revenue.html "Russia’s Gazprom expects increase in 2022 revenue") to be $70.58 billion, according to Refinitiv data.

Google’s earnings miss this quarter proves it’s not immune to the challenges [facing the digital](https://www.financedigest.com/3-top-digital-asset-threats-facing-your-brand-in-2017.html "3 top digital asset threats facing your brand in 2017") advertising industry at large,” said Jesse Cohen, senior analyst at Investing.com.

The speed of the slowdown also shocked [investors who are “highly sensitive to the changing](https://www.financedigest.com/bayer-hits-8-month-high-as-investors-welcome-ceo-change.html "Bayer hits 8-month high as investors welcome CEO change") tide,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

Ad [sales on streaming video site YouTube also declined to $7.07 billion](https://www.financedigest.com/allianz-puts-n26-stake-up-for-sale-at-3-billion-valuation-ft.html "Allianz puts N26 stake up for sale at billion valuation – FT"), from $7.2 billion in the prior-year quarter.

Alphabet’s net income fell to $13.91 billion, or $1.06 per share, from $18.94 billion, or $1.40 per share, a year earlier. Net income [missed analyst expectations](https://www.financedigest.com/ericssons-quarterly-core-profit-misses-expectations.html "Ericsson’s quarterly core profit misses expectations") of $1.25 per share.

The company’s [operating margin](https://www.financedigest.com/ubisoft-vows-to-get-back-to-operating-margin-above-20-in-medium-term.html "Ubisoft vows to get back to operating margin above 20% in medium term") declined to 25% in the third quarter, from 32% in the prior year.

The tech giant said in July it would slow the pace of hiring for the rest of the year, [saying it was “not immune to economic headwinds.” Porat said the company hired 12,700 people in the third quarter and expects to hire less than half](https://www.financedigest.com/over-half-of-britons-say-loyalty-cards-encourage-them-to-buy-a-product-niq.html "Over half of Britons say loyalty cards encourage them to buy a product – NIQ") that number in the final quarter.

Revenue from Google [Cloud rose to $6.9 billion](https://www.financedigest.com/why-a-quiet-revolution-in-the-cloud-is-worth-billions.html "Why A Quiet Revolution In The Cloud Is Worth Billions") during the quarter, from $5 billion a year earlier.

During a conference call with analysts, Alphabet Chief Executive Sundar Pichai said the company would continue to evaluate its [projects and make “course](https://www.financedigest.com/prince2-and-msp-training-the-rise-of-online-project-management-courses.html "Prince2 and MSP Training: The Rise of Online Project Management Courses") corrections” as needed. “Times like this are clarifying,” he said.

(Reporting by Eva Mathews in Bengaluru and Sheila Dang in Dallas; Editing by Anil D’Silva and Lisa Shumaker)


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