Google Summer Ad Business falls after Crypto Winter

Google Summer Ad Business falls after Crypto Winter

Internet giant Google is facing financial problems as advertisers, including crypto firms, cut spending amid rising inflation.

Alphabet released its on Tuesday Third quarter results - Quarterly net income of $13.9 billion - a 27% decline from a year earlier, missing analyst estimates of $16.9 billion. Revenue rose 6% to $69.1 billion, falling short of expectations of $71 billion.

The Mountain View, California-based company appears to be affected by the crypto winter, rising interest rates and fears of slowing growth as the global economy is still reeling from the pandemic and Russia's war in Ukraine.

This is what Philipp Schindler, Chief Business Officer of Google, said Result call that the slump was caused in part by crypto companies and other financial firms cutting advertising spending.

“In the third quarter, we saw a decline in spending by some advertisers in certain areas and search ads,” he said. “For example, in financial services, we saw a pullback in the insurance, lending, mortgage and crypto subcategories.”

Schindler did not elaborate on which crypto subcategories contributed to the slide, but rather the company's strict crypto advertising policy is intended to exclude dubious advertising or blatant scams.

Google did not respond to Blockworks' request for comment by press time.

Google's advertising revenue from YouTube fell 2% to $7.1 billion, the first time the division reported a loss. Meanwhile, Google search ad revenue rose 4.2% to $39.5 billion, but missed forecasts for 8% growth.

Alphabet CEO Sundar Pichai described the period as a "difficult time in the advertising market," and CFO Ruth Porat blamed "further declines in advertising spending" for the year-over-year slump.

The cryptocurrency market has been on a downward trend this year, hit by a mix of recession fears and the collapse of the Terra ecosystem, with popular assets such as Solana losing over 90% year-to-date in 2021. The price volatility forced major industry players such as Coinbase, Blockchain.com and BlockFi to rebalance operations and lay off thousands of employees.

Pay-per-click (PPC) marketing is generally not what Web3 companies do, and not what they have done in the past, according to Adrian Krion, founder and CEO of blockchain gaming startup Spielworks.

“Right now, [lower ad spending] is also related to the low interest rates and the bear market,” he told Blockworks, adding that companies in the industry are expected to rely on best practices like content and viral marketing all the way up to Google Financial products and services policy is made clearer.

Google relies on Coinbase for revenue diversification

Despite the bearish sentiment, the crypto winter is generally not seen as a terrible thing for the industry as a whole, as periods of slow growth are helpful in weeding out conceptually weak projects and making room for innovation.

Google seems to accept that the decline in revenue from crypto-related advertisers will not last long. Earlier this month, it signed a deal with Coinbase to soon begin accepting crypto payments from its cloud customers.

Lars Seier Christensen, chairman of Concordium and founder of Saxo Bank, said Google's new partnership is a "general endorsement of the crypto space," where more and more companies are accepting crypto as a viable offering for goods and services.

"But more importantly, there is no question that Google did this to gain additional market share for its growing cloud business. This means that Google saw real business potential in the equally growing number of crypto-native companies," he added.

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The post Google Summer Ad Business Falls After Crypto Winter is not financial advice.