Alphabet braced for an expected hit to its advertising business in the current quarter, after emerging from Q1 with results relatively unscathed by the Covid-19 (coronavirus) pandemic.
Net profit grew 2.6 per cent year-on-year to $6.8 billion, with revenue up 13 per cent to $41.1 billion. Advertising sales continued to be a key driver, increasing from $30.5 billion to $33.7 billion.
Sundar Pichai, CEO of Alphabet and Google (pictured), highlighted increased user engagement during the pandemic, noting a significant rise in video viewing time on YouTube and a 30 per cent jump in app downloads from Google’s Play store in February and March.
However, he said the advertising business experienced a “significant and sudden slowdown” in March, due to lockdowns.
While CFO Ruth Porat stated the company had already seen “some early signs” of recovery, she warned “it’s not clear how durable or monetisable that will be”.
“As of today, we anticipate that the second quarter will be a difficult one for our advertising business.”
Moving forward
Pichai and Porat said the company will cut costs during the slowdown, slashing its marketing spend, hitting the brakes on recruitment and reducing capex on global office facilities.
The CEO expressed confidence its advertising business would be quick to recover along with the economy, pointing to a swift rebound following an economic downturn in 2008. Pichai added Alphabet’s diversified portfolio, particularly its cloud unit, also positioned it to capitalise on a shift to virtual services expected to outlive the pandemic.
He noted “many businesses are speaking to us looking to reinvent their operations”, and predicted the outbreak would accelerate adoption of digital services for online work, education, medicine, shopping and entertainment.
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