Google Ad Spend Amid Macro Headwinds

Given the softer macro environment, many agencies have recently reduced their global ad estimates for 22/23 as advertising, driven by consumer expenditure and transactions, is highly cyclical and is often one of the first expenses cut by corporations in a difficult macro environment. Amid the weak guidance signaled by major online ad players, our data can help closely track Google advertising’s resilience via global Google ad revenue as well as pricing and volume breakdown by device type, geography, distribution network and category.

How did Google’s ad business perform?

Based on our data, Google’s ad business took a hit at COVID’s onset but surged in 2021. We’ve recently seen a deceleration primarily driven by a decline in Cost-per-click (CPC) growth, while Click growth has been relatively stable. CPC deteriorated further in June, even after accounting for the mix of device, region, and distribution network, suggesting that the deterioration was wide-spread and potentially due to advertisers’ budgets shrinking.

How did trends in device usage affect ad revenue and CPC?

Mobile grew rapidly as a percentage of total ad revenue over the past several years, and approached historical highs in 2Q22. The increasing mobile mix substantiates management’s commentary on continued adoption of mobile devices as a primary driver of ad spend. The mix shift toward mobile devices has driven overall ad revenue growth, but put overall CPC under pressure, as desktop CPC’s are 2-3x times higher than mobile CPC’s, considering the higher expected purchase amount on traditional desktop search.

What categories drove Google ad revenue?

Given reopened borders and vaccination rollout, Travel sectors (including lodging, tourism and transportation) continued to recover in 2Q this year, although they remained below pre-COVID mix levels. 

Interested in seeing more insights? Our analysts are constantly uncovering trends in GOOGL’s revenue growth. Connect with our analyst team to dive deep into the fundamental drivers of advertiser spend and user engagement on Google Advertising.