YouTube has been a major source of income for Google throughout the pandemic: people stuck at home have watched more videos. The increase in service revenues has proved to be a two-way stick: companies have to make more and more efforts to keep the bar high.
The most dramatic disappointment in Google's last quarterly report was that of YouTube: the advertising revenue of the service grew by only 4.8 per cent in annual terms, reaching $7.3 billion against the projected $7.52 billion by analysts. This is the lowest growth rate of YouTube since its owner Alphabet began to increase sales in the fourth quarter of 2019.
In the financial report, Alphabet's management strongly emphasized the anomaly of last year's outcome, trying to reassure investors and convince them that the slowdown would not be long-term, and the company should be careful with promises: last week Snap disappointed investors with its quarterly results, showing that in the light of current economic uncertainty, advertisers spend more carefully on budgets. Google's top managers partially agreed with this position, but did not mention another problem: competition.
In recent months, the company has increasingly noted the popularity of short video formats in general and TikTok in particular. Recently, Google's senior vice president, Prabhakar Raghavan, stated that up to 40% of the younger generation started a web search not with Google, but with TikTok and Instagram. The problem with the project is that it does not have a well-established monetization program: users are increasingly choosing a new format and the platform only tests ways to earn money from it.
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