But Alphabet Chief Financial Officer Ruth Porat told analysts on Tuesday that while users were searching more, they were looking up less commercial topics and advertisers were cutting spending.
“As of today, we anticipate the second quarter will be a difficult one for our advertising business”, Porat said.
Porat said search ad revenue had declined by a “mid-teens percentage” by the end of March compared with a year earlier.
Alphabet’s overall revenue in the first quarter was $41.2 billion, up 13 percent compared with the same period last year. Analysts expected $40.29 billion, up 10.87 percent, expecting the slowest growth since 11.1 percent in the second quarter of 2015.
While Google tools including Duo video chatting and YouTube have become essential to many users this year, the company largely does not charge for them and instead generates revenue selling ad tools as well as links, banners and commercials on its services and those of partners.
But more than 26 million people have filed for unemployment during the last month in United States, Google’s largest market for ad sales, erasing all of the country’s job gains in the last decade. Google’s ads business generated about 83 per cent of Alphabet’s revenue last year. It tends to flow with the broader economy, which explains Alphabet’s slower revenue growth in the first quarter.
Google ad sales were $33.8 billion, up about 10 percent from last year’s first quarter.
About 5.5 percent of Alphabet’s revenue last year came from cloud services for which Google charges businesses, schools and governments. This year, the company has extended various free offers to aid customers affected by the pandemic.
The cloud business generated $2.8 billion in revenue, up 52 percent from a year ago.
With usage of Google’s services up but sales down, the company in the current quarter has introduced what analysts have called “austerity” measures. It has pared hiring, internship programs, marketing, office expansions and other spending plans.
The company does not forecast revenue or profit. But the current quarter and remainder of 2020 could be bleak, according to some outside forecasts by ad agencies and other industry consultants. Two expected boosts to revenue - the US presidential election and the Olympics - will offer smaller bumps because of the virus as campaigning grows more muted and the Tokyo games get pushed to next year. Some have estimated ad sales declines of up to 20 percent in the coming quarters.
Alphabet’s first quarter profit was $6.8 billion, or $9.87 per share, compared with the analysts’ average estimate of $7.21 billion.
