Winter is here.
Google-parent Alphabet, the titan of the digital advertising industry, stumbled on Tuesday, reporting weaker-than-expected earnings for Q3 and signaling that even the most deep-rooted businesses in the sector are having trouble navigating the arduous terrain before them.
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Facing stiff competition from TikTok and grappling with the cruel economic headwinds punishing the entire industry, YouTube even reported a drop in revenue, falling 2% versus analyst expectations of an increase of roughly 3%. It’s the first time YouTube’s ad revenues have shrunk since Google started reporting earnings for the video-sharing site separately.
“Times like this are clarifying,” CEO Sundar Pichai said in a call with analysts.
Yes, they are.
The poor Q3 earnings provide even more evidence that the digital advertising industry is in peril, with companies cutting spending on online ads as they also try to grapple with the uncertainty looming large over the global economy. The earnings also point to the stunning dominance of TikTok, which has started to eat away at the profits enjoyed by Big Tech giants such as Google.
Those clear signals, which follow poor earnings from Snap last week, sent other giants in the tech sector into negative territory in after-hours trading. Meta, which reports earnings Wednesday, was down 4%. Snap was down 4%. And Pinterest was down 4%.
“When Google stumbles, it’s a bad omen for digital advertising at large,” Insider Intelligence’s principal analyst Evelyn Mitchell said, adding, “This disappointing quarter for Google signifies hard times ahead if market conditions continue to deteriorate.”