Google announces first revenue drop in company history

Alphabet, the parent company of Google, announced Thursday that Google sales had dropped for the first time in the company’s history, as ad revenue took a hit during the COVID-19 pandemic.

The company rolled out its earnings report for the second quarter of the year, reporting revenues of $38.3 billion, a two percent decrease from the same time period in 2019. The company also reported a dip in operating income, with more than $6 billion in income during the second quarter of 2020 as compared to more than $9 billion during the second quarter of 2019. 

“We’re working to help people, businesses and communities in these uncertain times,” Sundar Pichai, CEO of Google and Alphabet, said in a statement on Thursday. “As people increasingly turn to online services, our platforms — from Cloud to Google Play to YouTube — are helping our partners provide important services and support their businesses.”

Ruth Porat, the chief financial officer of Alphabet and Google, acknowledged that the company was continuing to cope with the changes to the online market from the pandemic. 

“In the second quarter our total revenues were $38.3B, driven by gradual improvement in our ads business and strong growth in Google Cloud and Other Revenues,” Porat said in a statement. “We continue to navigate through a difficult global economic environment.”

Porat said during an investor call Thursday that the “year on year decline in sales and marketing expenses was due to lower advertising and promotional spend as we paused or rescheduled campaigns as we pivoted to digital formats for flagship events.”

Google Search revenue was down by 10 percent during the second quarter of 2020 as compared to the same time period in 2019. YouTube, owned by Google, saw a 6 percent increase in advertising revenue. 

Porat noted that the company “saw a gradual return and user search activity to more commercial topics throughout the quarter, followed by an increase in spending by advertisers.”

She also announced that Alphabet hired 4,450 new employees during the second quarter, mostly as engineers and product managers, and said Google would continue to hire “aggressively” for areas such as Google Cloud while overall slightly “decelerating” hiring. 

The earnings report was rolled out at the same time Amazon, Apple, and Facebook announced their second quarter earnings. 

The reports were published the day after the CEOs of all four companies testified during a House Judiciary subcommittee hearing on antitrust concerns. Pichai was questioned heavily by lawmakers, many Democrats, on issues ranging from the company’s work with law enforcement to how Google handles consumer data.

Pichai testified Wednesday that the company would continue to work with law enforcement, including through Google Cloud services, despite backlash from Google employees who asked the company to cut ties with police departments following nationwide protests over the killing of George Floyd.

Pichai emphasized during an investor call on the earnings report Thursday that Google would “commit to contributing to long-term meaningful change, both externally, and within Google” around racial justice issues.