On February 2, Alphabet revealed its earnings for the fourth quarter of 2022. The parent company of Google missed its projections, as did its subsidiary video platform. YouTube ad revenue fell about $300 million short of expectations, though its short-form platform delivered massive viewership during the quarter.
YouTube was expected to hit $8.25 billion in quarterly ad revenue, but it reported $7.96 billion in that category instead. In total, Alphabet pulled in $76.05 billion in Q4 revenue, which was about $500 million short of projections. The Google holding company only grew 1% year-over-year since Q4 2021. That’s its lowest YOY increase since Q2 2020, when the onset of the COVID-19 pandemic put a damper on businesses around the globe.
Google’s recent layoffs won’t come cheap
Due to the uncertain economic climate, Alphabet let 12,000 workers go in January. In the company’s latest earnings call, it reported that its cuts would incur a charge between $1.9 billion and $2.3 billion. Meanwhile, Alphabet CFO Ruth Porat noted that Alphabet added 3,455 people in Q4, mostly in technical roles.
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Alphabet will likely incur more losses as it navigates an industry-wide downturn, but other Big Tech firms have taken even harder hits. Several companies that released their Q4 2022 earnings report absorbed Wall Street hits, but it was Amazon — not Alphabet — whose stocks fell the furthest.
Can YouTube Shorts produce a turnaround?
The TikTok competitor will be a welcome addition to YouTube’s ad offerings during Q1 2023. Revenue sharing for Shorts ads went live on February 1, and creators are eager to try out the new monetization scheme. During Alphabet’s latest earnings call, CEO Sundar Pichai said that YouTube Shorts now gets 50 billion views per day.
On the call, Google Chief Business Officer Philipp Schindler described YouTube as “the only destination where creators can produce all forms of content across multiple formats, across multiple screens, and really, with multiple ways to make a living.” He hopes that a multiformat approach will “make YouTube the best place for Shorts and creators.”
ChatGPT heralds changes to Google Search
YouTube isn’t the only part of Alphabet’s business that is struggling to meet revenue expectations. Google Search has been beset by several challenges, including the rise of TikTok as an alternative search engine.
AI is also a factor. The launch and meteoric rise of ChatGPT has given consumers a new option for answering questions. To keep pace, Google is doubling down on its own AI development. “Very soon,” Pichai said, “people will be able to interact directly with our newest, most powerful language models as a companion to Search, in experimental and innovative ways.”
