Alphabet, the holding company of Google and YouTube, recorded a “significant and sudden” slump in March advertising revenue as COVID-19 pressures took hold among advertisers, according to the company’s Q1 2020 earnings call.

The company reported that Q1 2020 revenue from search ads increased 9% year-on-year to US$24.5bn, while advertising revenue for YouTube jumped 33 percent to $4bn. A strong January and February helped offset some of the March headwinds.

“In March, revenues began to decline, and at the end of the month (there was) a mid-teens percentage decline in year-on-year revenues,” reported Ruth Porat, Chief Financial Officer for Alphabet and Google.

“Although users’ search activity increased, their interest shifted to less commercial topics. In addition, there was also reduced spending by our advertisers.”

Certain categories such as travel, which drives billions of dollars in search ad spend, have been especially hard-hit.

“At the inception of the crisis, the increase in user interest was for more information about COVID-19 and related non-commercial topics, although we have seen some very early signs of recovery and commercial search behaviour by users,” Porat said.

“It is not clear how durable or monetizable this behaviour will be,” she added.

However, Alphabet executives are optimistic that given the influx of users COVID-19 has brought to the company’s platforms, and a strong start to the quarter pre-COVID-19, advertisers will again turn to Google and YouTube when they are inclined to start spending again.

Porat warned that the second quarter is likely to be challenging with regard to advertising revenues, but said Alphabet remains well placed overall despite challenging headwinds.

“In order to gauge the ongoing potential financial impact to our business from COVID-19, the key signal to monitor is macro-economic performance which tends to be correlated with advertising expense,” she explained.

“As of today, we anticipate that the second quarter will be a difficult one for advertising business. As we move beyond the crisis, and the global economy normalises, this should be reflected in our advertising revenues.”

Sourced from Alphabet