Ad Revenue At Google Expected To Drop

Google’s U.S. advertising revenue will decline this year for the first time since eMarketer began modeling it in 2008, the research firm said, largely because Google’s core search product is so reliant on the pandemic-battered travel industry, The Wall street Journal reports.

Wall Street Journal graphic

As the world’s largest digital-advertising company, the Alphabet Inc. unit has heretofore been a money-printing machine, expanding its overall advertising revenue at double-digit rates in nearly every year of its two-decade existence, save for the 2008-09 financial crisis, when it only grew 8%. The firm doesn’t break out its U.S. revenue, but eMarketer’s model found that even in that crisis, Google’s U.S. ad revenue grew.

What is different this time is the way the coronavirus pandemic obliterated marketing spending in some of Google search’s biggest advertisers, and the way some of these advertisers have been public about rethinking their plans to return to the platform even after the pandemic passes.

“The biggest single culprit here is the travel industry, which has been both hardest hit by the pandemic generally, and has concentrated spending on Google in the past,” said Nicole Perrin, principal analyst at eMarketer. “We have already heard statements from major travel companies, like Expedia, that normally spend billions of dollars on Google, mostly on search, that they are pulling back spending on Google and search, and that will continue for the rest of this year.”

Travel represented about 11% of search ad revenue in 2019, Needham analyst Laura Martin estimated.