YouTube’s Q3 ad revenue slides 1.9% YoY amid ‘shift in user behavior’

Alphabet posted a 27% drop in annual profit in the third quarter as the tech giant became the latest to be hit by a global ad slowdown that has resulted in lower ad revenue for its platforms. like YouTube.

YouTube ad revenue for the third quarter hit $7.07 billion, down 1.9% from $7.21 billion a year earlier, according to Alphabet’s quarterly results Released Tuesday (October 25).

That miss Analysts’ median forecast is $7.42 billion, according to estimates compiled by FactSet. But while the drop was mild, it marked the first time YouTube’s ad revenue fell on a yearly basis since Alphabet began reporting the division’s results in 2019.

“This shift in user behavior also puts downward pressure on our ad revenue, with lower revenue from ad spend across YouTube, Network and Play Ads in Search and other activities”.

Philipp Schindler, Alphabet

Philipp Schindler, Alphabet’s SVP and Chief Business Officer told analysts in a earnings call that same day in addition to YouTube, revenue in Google The game is also declining gradually on a CHILD basis, citing “a decline in user engagement in the game compared to the high increase seen earlier during the pandemic”.

“This shift in user behavior also puts downward pressure on our ad revenue, with lower revenue from ad spend across YouTube, Network and Play Ads in Search and other activities,” added Schindler.

Meanwhile, Alphabet’s CEO, Sundar Pichai, attributed the drop in ad revenue to a high increase last year.

“Our ad revenue growth was also influenced by last year’s high growth and challenging macro environment,” Pichai said.

However, an analysis of Alphabet’s results in 3rd quarter of 2021 shows that YouTube’s ad revenue has in fact grown 43% from a year ago.

Most recently, Alphabet’s CFO Ruth Porat noted that YouTube and the Network have suffered a decline in spend by some advertisers, as first recorded last quarter.

These reductions in ad spend accelerated in the third quarter, Schindler said.

However, Alphabet’s Q3 report showed that overall revenue from Google’s ad business increased 2.5% year-on-year to $54.48 billion due to a decline in advertising from YouTube and from The Google network was offset by a 4% increase in ad revenue from Google Search and other services, attributed to travel and retail-related searches, according to Schindler.

Meanwhile, Pichai told analysts on Tuesday that Alphabet is increasing its focus on a series of clear product and business priorities, including “new ways to monetize YouTube Shorts, which will support support the creator ecosystem”.

“We will introduce revenue sharing on Shorts early next year. This update makes YouTube the only platform where creators can monetize their content across short, long, and live formats at scale. “

Sundar Pichai, Alphabet

“This is a big deal for creators and for our business. We will introduce revenue sharing on Shorts early next year. This update makes YouTube the only platform where creators can monetize their content across short, long, and live formats at scale,” Pichai said.

Schindler added: “Overall, I feel YouTube is still in a really good position to continue to benefit from the streaming boom. In direct response, we think there’s a lot of opportunity to make YouTube truly more buyable, actionable, from video action campaigns to product feeds, app campaigns, features, and more. direct commerce. “

The CEO added that advertisers are turning to YouTube to “convert intent into action.”

The drop in YouTube’s ad revenue shows that even the internet giants are not vulnerable to the global decline in advertising after the pandemic.

“Google’s earnings failure this quarter proves it’s not immune to the challenges facing the digital advertising industry,” said Jesse Cohen, senior analyst at Investment.com.

While Alphabet’s overall revenue grew 6% year-over-year and 11% constant currency to $69.09 billion, the group’s net income fell 27% to $13.91 billion. dollars, or $1.06 per diluted share.

Analysts expect average revenue of $70.58 billion, while net income is forecast at $1.25 per share, Reuters speakcite Refinitiv data.

Last week, Snap also posted lower-than-expected earnings results, while Facebook The parent meta, which is set to announce its earnings later today (October 26), is also guess to report falling revenue for the second straight quarter.

Spotifymeanwhile, said on Tuesday that it suffered some “softening” in advertising in the third quarter, reducing its profit margins.Worldwide music business