Google’s mother Alphabet is suffering from dwindling advertising revenue

alphabet

The tech group lost around four percent on the stock exchange after the close of trading.

(Photo: AP)

san francisco The Google parent company Alphabet wants to react to the success of the AI ​​chatbot ChatGPT with software. “In a few weeks” the Lamda AI program will be activated for all users, Alphabet boss Sundar Pichai announced on Thursday.

In addition, Google’s search is optimized by using large language models, the technology on which ChatGPT is based. “Soon, people will be able to interact directly with our latest and most powerful language models, and add to search in experimental and innovative ways,” Pichai said when presenting the quarterly results.

The company is working to make artificial intelligence-based solutions available for industry, biotechnology and retail. In addition, the e-mail service Gmail and the word processor Docs will be expanded to include AI functions.

In November, the Microsoft-sponsored start-up OpenAI published ChatGPT, a text system based on artificial intelligence. The program can write essays, develop business models or write poems on command. Among other things, Microsoft wants to upgrade its search engine Bing, which is in direct competition with Google.

With the announcements, Google wants to react to Microsoft’s offensive. At the same time, Pichai was visibly trying to tell a new growth story with a focus on AI when presenting the quarterly figures on Thursday. Because Google is under massive pressure in its core business of online advertising and had to report a slump in profits.

Net income fell to $13.62 billion from $20.64 billion in the same period last year, Pichai said. At the same time, advertising revenue shrank to $59.04 billion from $61.24 billion. Group sales rose to 76.05 from 75.33 billion dollars. However, analysts had hoped for $76.53 billion. Alphabet shares then fell nearly 4 percent in US after-hours trading.

Youtube below expectations

Google’s flagship search engine and other related businesses generated revenue of $42.6 billion in the fourth quarter, compared to analysts’ median estimate of $43.3 billion.

The video platform YouTube fell well short of expectations. YouTube reported $7.96 billion in ad revenue, compared to Wall Street’s estimate of $8.3 billion.

Google also continued to make a loss in the cloud business, albeit to a lesser extent than feared. The division posted a loss of $480 million, beating analysts’ expectations for a loss of $862 million.

YouTube’s poor performance was expected, but other areas are more dramatic, Insider Intelligence analyst Evelyn Mitchell said. “Search revenue, which is performance-related and typically spared by falls in ad spend, also declined,” Mitchell said, citing, “These results from a company as large and influential as Google do not bode well for the rest of the digital advertising industry.”

Google is the largest provider of online advertising in the world. The company will generate $180.59 billion in digital ads net revenue in 2023, according to Insider Intelligence forecasts, up 7 percent year-on-year. This gives Google a 29 percent share of the global digital advertising market. Facebook is in second place with a share of eleven percent.

In January, the Google group Alphabet announced the largest wave of layoffs in the company’s history. 12,000 jobs, or six percent of its global workforce, have been eliminated. The cost of severance payments was about $2 billion, said CFO Ruth Porat. “We are significantly slowing the pace of hiring in 2023, but continue to invest in priority areas,” announced Porat.

More: The tech group Alphabet wants to cut six percent of its jobs. This was announced by company boss Sundar Pichai in an e-mail to his employees.

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