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Alphabet profits drop as YouTube growth slows

Alphabet, the parent company of Google, has reported record revenue but lower profits for the first quarter of 2022, while YouTube appears to be struggling.

The company reported $68 billion of revenue (via the FT) for Q1, which which represents a dramatic rise from $55.3 billion the previous year.

However, the company’s net profit for the quarter dropped to $16.4 billion from $17.9 billion the previous year. This was below analyst expectations of $17.33 billion.

Among the reasons behind this, one of the most notable is slowing advertising growth over at YouTube. The company partly blamed the war in Ukraine, which not only saw the company freezing its commercial activities in Russia, but has supposedly prompted European advertisers to pull back on spending.

The company pointed to the rise in viewership and importance of YouTube’s short-form Shorts content as one positive outcome for the quarter, especially given the runaway success of rival TikTok.

It’s worth pointing out that last year saw a pandemic boom for the company, with digital advertising receiving a huge spike as everyone stayed at home and increased their internet usage. That was never likely to last once things started opening up again.

Indeed, the return to something approaching normality has seen Google’s search revenue rising by 24 percent from a year ago, with travel searches said to have spiked.

Google Cloud reported a 44 percent growth in revenue, though it’s still a loss-making area of the business.

Q2 could be even rougher for Alphabet and YouTube, due to unfavourable exchange rate and the company’s complete freeze of its efforts in Russia, which accounted for 1 percent of its revenue in 2021. The comparison to Q2 2021, which was exceptionally strong for Alphabet, is unlikely to be a flattering one.

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