Google Cuts Its Marketing Budget: What Does It Mean?

You know the financial impact of the coronavirus is serious anyway Google fear of losing money. In reality, For the very first time, the tech giant is expected to see a drop in ad revenue. In response, the company announced that it would reduce its marketing budget halved for the remainder of 2020. This news came just before Alphabet, Google’s parent company, released its earnings report, which came out yesterday. The company grew revenue by 13% in its most recent quarter, which was a bit of a surprise given the ongoing global pandemic and the expected reduction in advertising spend. So the budget cut news for me is likely a decision based on Google’s expectations of tougher times ahead.

If any company was immune to the coronavirus, you’d think it would be Google. His name is a literal verb in the Oxford English Dictionary. And with more kids at home, on their computers, you’d expect Google to have even more “business” than usual. In fact, reports show kids’ screen time has increased 70% due to the pandemic. Parents and non-essential workers are also at home—increase their screen time, too, whether it’s looking up information about the coronavirus itself or trying to figure out their kids’ math homework. Yet there seems to be at least one flaw in Google’s security armor as the world’s favorite search tool: marketing revenue. And with fewer companies advertising their products, Google is about to take a big hit.

How important is ad revenue to Google?

In a word: huge. Google derives a large portion of its revenue from advertising on its Google Ads platform. These cover everything from display ads to product listings and service offerings. In fiscal year 2018, it was estimated at more than 70% of Google’s revenue came from ad spend on Google’s assets. In 2019, its turnover was over $134 billion. In other words, a loss of almost any size would be significant.

Some analysts are predict google and Facebook will lose more than $44 billion in combined ad revenue this year. Indeed, while many companies continue to promote their products or services online, some, especially those in the travel and hospitality industry, have stalled. And it turns out that the travel industry accounts for 15% of Google’s ad revenue.

Another factor: the Tokyo Summer Olympics have been postponed to 2021, a huge loss advertising expenses which must be excluded from the budget. Given these issues, it makes sense for the company to cut its marketing budget by 50% for the rest of the year. The big question: is this the only cut we’ll see? Or will his losses go deeper? We have already seen leagues and major sporting events postponed and closed. Questions regarding the NCAA football season, NFL, Major League Baseball and more remain. Until these questions are answered, Google is being cautious in its marketing – it doesn’t surprise me, and it shouldn’t surprise you.

Reducing Marketing Budgets: Who Will It Impact?

At this time, we know Google’s cuts will impact the agencies it employs, as well as its internal agencies like Google Creative Labs. The most recent figures show that he still expects to see a growth of 6% in 2020 overall (compared to 13% in 2019). And although the company has apparently frozen the hiring of new full-time and contract employees, the company appears to be hiring for other areas selected the company. In fact, Google has said it won’t cut workers in areas that provide essential services to customers. Yet, as with most things about COVID-19, it’s hard to get a straight answer when the pandemic is unfolding in real time.

Reducing Marketing Budgets: Is It Enough?

Honestly, it’s too early to tell. Based on the first quarter financial statements, it would appear to have been a rash decision, but I guess investors are more interested in projections for the future, rather than reports that focus on the past – the second quarter will be more representative of the full impact of the COVID-19 pandemic and global lockdowns. Google, after all, isn’t just a tech giant, it’s an industry pioneer. Many companies are likely looking to them to help them forecast the kinds of losses they will also see in ad revenue throughout the rest of the year, if not longer. But no one is in a position to peer into a crystal ball at the moment and determine when non-essential businesses and services will be able to open, especially travel and hospitality. And even when they do, it’s not clear what these industries will “look like” from a business perspective.

For example, will we see restaurants that can only accommodate half of their customers due to social distancing? Will the same be true for airlines, hotels, concerts and other social gatherings? These ever-changing situations are what many of Google’s ad clients face, and they’re things we just don’t know about. We also don’t know if Google’s investments in things like contact tracing could propel it to even bigger earnings this year. There’s simply no way to project, because despite the amount of data Google has collected on its users around the world, Google doesn’t have the data to predict the outcome of this most significant health crisis in the world. modern history.

Remember: Google is much more than an advertising engine. It invests in many other technological areas. And, it has weathered a recession before. I am confident that the company will survive the COVID-19 crisis. The only question is how deep and wide will be the impact of the pandemic and its impact on customer ad spend. As science continues to reveal the evolution of this disease and Google is able to assess customer spending data, the company will adapt and adjust. Likely, recapturing a significant portion of marketing spend as we enter post-pandemic “Normal”.