The decline in ad spending slashed YouTube revenue for the third quarter of 2022, as the Google video platform generated $7.07 billion in ad sales — a decline of 1.9%, well below Wall Street expectations and its slowest growth in at least two years.
Overall, Alphabet, Google’s parent company, also came in below analyst estimates. The company reported revenue of $69.1 billion and earnings per share of $1.06 for the third quarter. Wall Street was expecting $70.61 billion on the top line and earnings per share of $1.25, according to Refinitiv data.
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In the last year’s quarter, YouTube ad sales jumped 43%. Analysts, on average, expected YouTube ad revenue to reach $7.42 billion during the quarter, according to estimates compiled by FactSet’s StreetAccount. Alphabet first revealed YouTube ad revenue for the 2019 calendar year.
“We are tightening our focus on a clear set of products and business priorities,” Sundar Pichai, CEO of Alphabet and Google, said in the earnings announcement, noting that the company has introduced “new ways to monetize YouTube Shorts.” “We are focused on both long-term responsible investing and responding to the economic environment.”
Over the past couple of years, YouTube has been pushing hard for shorts, the short video feature designed to compete with the hugely popular TikTok app. In June, Google said YouTube Shorts exceeded 1.5 billion monthly logged in users. This year YouTube began showing ads in short films, and starting in early 2023, YouTube Short launched a revenue sharing program for creators who meet certain criteria. YouTube will pay 45% of revenue to creators of personalized short films based on views, which is down from the 55% shared by the main YouTube Partner Program.
With revenue growth slowing, Google has taken several steps to cut costs. Among those, the company last month announced the closure of its Stadia cloud gaming service. Pichai said this summer that Google would slow the pace of hiring until the end of 2022. At a Code conference last month, he said he wanted to improve the company’s “efficiency” by 20%, meaning layoffs could be a way to do that.
YouTube ad sales figures reported by Alphabet do not include subscription revenue from YouTube Premium and YouTube TV. In July, Google said YouTube TV had more than 5 million subscribers and users in free trial periods, making it the largest online pay-TV service in the United States.
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