Google Summer Ad Business falls after crypto winter

Internet giant Google is experiencing some financial pain as advertisers, including crypto firms, pull back on spending along with rising inflation.

Parent company Alphabet on Tuesday posted third-quarter earnings — a quarterly net profit of $13.9 billion — down 27% from a year ago, missing analyst estimates of $16.9 billion. Revenue rose 6% to $69.1 billion, missing expectations for $71 billion.

The Mountain View, California-based company appears to have been affected by the crypto winter, rising interest rates and fears of slowing growth as the global economy continues to choke from the pandemic and Russia’s war in Ukraine.

Philipp Schindler, Google’s chief business officer, said on the earnings call that the decline was driven in part by crypto companies and other financial firms trimming ad spending.

“In the third quarter, we saw a decline in spending by some advertisers in certain areas and search ads,” he said. “For example, in financial services, we saw a pullback in the insurance, loans, mortgages and crypto subcategories.”

Schindler didn’t elaborate on which crypto subcategories contributed to the slide, but the company’s strict crypto ad policies are designed to shut out shady advertising or brazen scams.

Google did not return Blockworks’ request for comment by press time.

Google’s ad revenue from YouTube fell 2% to $7.1 billion, the first time the division reported a loss. Meanwhile, Google’s search ad revenue rose 4.2% to $39.5 billion, but missed forecasts for 8% growth.

Alphabet CEO Sundar Pichai described the period as a “tough time in the advertising market”, and CFO Ruth Porat blamed the year-on-year decline on “further pullback in advertising spend”.

The cryptocurrency market has been on a downward trend this year hit by a mix of recession fears and the collapse of the Terra ecosystem, with 2021 darlings like Solana down over 90% year-to-date. Price volatility forced major industry players including Coinbase, Blockchain.com and BlockFi to suspend operations and lay off thousands of employees.

Pay-per-click (PPC) marketing is generally not what Web3 companies do, and not what they have historically done, according to Adrian Krion, founder and CEO of blockchain gaming startup Spielworks.

“Right now, [lower ad spending] is also related to the low interest and the bear market,” he told Blockworks, adding that businesses in the industry are expected to rely on proven practices such as content and viral marketing until Google’s guidelines for financial products and services are clearer.

Google bets on Coinbase for revenue diversification

Despite the bearish sentiment, the crypto winter is not generally seen as a terrible thing for the industry as a whole, as times of slow growth are useful for weeding out conceptually weak projects, and creating space for others to innovate.

Google seems to accept that the decline in revenue from crypto-related advertisers will not be long-lasting. Earlier this month, it struck a deal with Coinbase to soon start accepting crypto payments from its cloud customers.

Lars Seier Christensen, chairman of Concordium and founder of Saxo Bank, said Google’s new partnership is a “general endorsement of the crypto space” where a growing number of businesses are accepting crypto as a viable tender for goods and services.

“But more importantly, there is no doubt that Google has done this to gain additional market share for its growing cloud business. This means that Google has recognized a real business potential in the equally growing number of crypto-native businesses,” he added.

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