Google Summer Ad Business Falls After Crypto Winter

Internet giant Google is seeing some financial pain as advertisers, including crypto firms, pull back on their spending alongside rising inflation.

Parent company Alphabet on Tuesday posted its 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 climbed 6% to $69.1 billion, falling short of the $71 billion expectation.

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 is still reeling from the pandemic and Russia’s war in Ukraine.

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

“In the third quarter, we did see a pullback in spend by some advertisers in certain areas and search ads,”  he said. “For example, in financial services, we saw a pullback in the insurance, loan, mortgage and crypto subcategories.”

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

Google didn’t return Blockworks’ request for comment by press time.

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

Alphabet CEO Sundar Pichai described the period as a “tough time in the ad market,” and Chief Financial Officer Ruth Porat blamed the year-on-year slump on “further pullbacks in advertiser spend.”

The cryptocurrency market has trended downward this year, hit by a mix of recessionary fears and the collapse of the Terra ecosystem, with 2021 darling assets such as Solana down over 90% year to date. Price volatility forced major industry players including Coinbase, Blockchain.com and BlockFi to rejig operations and lay off thousands of employees. 

Pay-per-click (PPC) marketing is generally not what Web3 businesses do, and not what they have historically been doing, 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 like content and viral marketing until Google’s financial product and services policy is made clearer.

Google bets on Coinbase for revenue diversification

Despite the bearish sentiment, the crypto winter is not broadly seen as a terrible thing for the industry as a whole, as times of slow growth are helpful in rooting out conceptually weak projects and carving out space for others to innovate.

Google appears to accept that the drawdown in revenue from crypto-related advertisers won’t last long. Earlier this month, it inked a deal with Coinbase to soon begin accepting crypto payments from its cloud customers.

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

“But more importantly, it’s unquestionable 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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