For the first time in its history, Google reported a decline in year-over-year revenue in Q2 due to the impacts of COVID-19 (revenue was flat on a constant currency basis). Additionally, Advertising Revenues were down year over year, but Google did indicate improving performance throughout the quarter. While different verticals have had very different results (e-commerce is growing rapidly; travel not so much), the pandemic has clearly created a very challenging environment for Google.
One area of advertising that did continue to grow was YouTube, which was up 6% for the quarter. However, that growth rate was significantly lower than Q1’s 33%. Other services such as Cloud and YouTubeTV continued with strong growth.
Some highlights from the quarter:
- Revenue decreased 2% for the quarter (neutral on a constant currency basis) totalling $38.3 billion.
- Advertising revenues were $29.9 billion — a decrease of 8.1%.
- Search revenues were $21.3 billion — a decrease of 9.8%.
- YouTube ad revenue was $3.8 billion — growing 5.8%.
- Google Cloud revenue was $3.0 billion — growing 43.2%.
- Other revenue, which consists of Google Play, Hardware and YouTube’s non-advertising services, was $4.4 billion — growing 25.6%.
- Operating income was $7.6 billion, down from $10.3 billion a year ago.
- Hiring continued, and Google now has 127,000 employees.
- Paid clicks increased 8%, average cost per click declined by 15%
One trend that has continued the last several quarters is the slowing growth of Google’s core search advertising business. This indicates that others are taking market share — specifically Facebook and Amazon, which reported Q2 advertising growth rates of 10% and 41%, respectively.
During the earnings call, one area that Sundar Pichai, Google’s CEO, called out was the improvements in the user and merchant experience for Shopping. In April, Google enabled merchants to list their products for free on the Google Shopping tab and more recently have announced that sellers using Buy on Google will no longer pay a commission fee for sales through the platform. Additionally, sellers will have more choice around things like payments with a partnership announced with PayPal.
While this was clearly a unique quarter for Google, it will weather the storm. Google invested heavily (though it didn’t name a specific dollar amount) in COVID-related items during the quarter — everything from surfacing relevant public health information on YouTube to displaying testing sites on Google Maps and Search. Ultimately, all of these items serve their ultimate mission of creating the most helpful products for everyone. And in many respects, this mission was more evident in Q2 than ever before.
