Advertising revenue from YouTube, under threat from new players such as short form video platform TikTok, has dropped for the third quarter in a row.
Alphabet, Google’s parent group, reported YouTube advertising fell 2.6% to $6.69 billion in the March quarter but this was still ahead of analyst expectations.
Overall, Google revenue was up ahead of market expectations by 3% to $69.78 billion compared to the same three months last year.
But YouTube continued its slide, dropping 7.8% in the December quarter 2022 and 1.9% down in the three months to September.
The global digital platform is resetting its cost base, freezing hiring, cutting 6% of its workforce. Reports also suggest some now-traditional staff perks will be removed.
And its answer to short form video, Shorts, is now averaging over 30 billion daily views, about four times as much as a year ago.
Max Willens, senior analyst at Insider Intelligence, says Google exceeded overall revenue expectations but reasons for optimism are modest.
"Google's ad business is under threat,” says Willens.
“YouTube revenues declining again, and Search and Other revenues rising less than 2% reflect the reality that Google's core business is facing the most serious challenges it has encountered in quite some time."
Google CFO Ruth Porat says YouTube is being compared to a very strong quarter in 2022.
And the war in Ukraine hadan "outsized impact" on YouTube ads relative to the rest of Google.
"We're experiencing a slight headwind to revenue growth as Shorts viewership grows as a percentage of total YouTube time," says Porat.
"We are testing monetisation on Shorts, and early advertiser feedback and results are encouraging. And the team is focused on closing the gap with traditional YouTube ads over time."
Chief business officer Philipp Schindler says there are 2 billion plus logged-in viewers who visit YouTube every month.
"More people are creating content on YouTube than we've ever seen before," Schindler says.
"And the team remains very focused on trying to help creators grow, trying to innovate. And just to give you a number, 2021, the number of YouTube channels that had made at least $10,000 in revenue was up more than 40% year over year.
"And we're heavily investing in Shorts, in the connected TV and shopping."
Google CEO Sundar Pichai is pleased with business performance in the first quarter with Search performing well and momentum in Cloud.
"We introduced important product updates anchored in deep computer science and AI.
"Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation.”
Google numbers for the March quarter:
Insider Intelligence forecasts:
Google to generate $180.59 billion in net digital ad revenue in 2023, an increase of 7.2% over last year.
That gives it a 28.4% share of the worldwide digital ad market.
Meta is second with 20.1%.
In Search, Google will stay the dominant player with $140.97 billion, or about 57.4% of the global search ad market.
Google's worldwide display business will grow to $29.90 billion, giving it a 9.%.
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