Google parent Alphabet reported first quarter earnings that showed a significant slow down in YouTube advertising revenue growth.
YouTube advertising revenues of $6.9 billion were up 14%, but compare unfavorably to about 49% growth in Q1 2021.
“The deceleration in the year-on-year growth rate primarily reflects lapping of the exceptional performance of direct response that we called out in the first quarter of 2021,” said Alphabet CFO Ruth Porat, according to a transcript from SeekingAlpha.
The most direct impact to Google revenues from the war in Ukraine after Russia’s invasion stems from the company’s decision to suspend most of its commercial activities in Russia, according to Porat, who said the war did have “an outsized impact on YouTube ads relative to the rest of Google. She noted that about 1% of Google revenues were from Russia in 2021, primarily from advertising. Since the war started, there was also a pullback in advertising spend, particularly on YouTube in Europe, she added.
In the Google Services bucket Other revenues were up 5% to $6.8 billion, which Porat attributed to “substantial growth” in non-advertising YouTube revenues, driven by more subscribers for YouTube TV, as well as YouTube Music and Premium. Those were largely offset by year over year declines in Play revenues related to price changes, she continued.
The company didn’t provide specifics on the subscriber growth for its vMVPD YouTube TV.
Total Google services revenues were up 20% to $61.5 billion
Pointing to two areas of opportunity for YouTube, Alphabet CEO Sundar Pichai called out short-form videos via YouTube Shorts as well as the living room and more interactive experiences with YouTube viewed on TVs.
Viewers are watching, on average, over 700 million hours of YouTube content on TVs every day, according to Pichai. As previously disclosed, he said later this year the company plans to bring new features to YouTube connected TV viewers, with smartphone navigation control and interactivity capabilities that allows people to comment share content their watching on televisions directly from mobile devices.
Chief business officer Philipp Schindler expressed enthusiasm for YouTube on connected TVs and bringing in advertising.
He said that in December over 135 million people in the U.S. were reached via YouTube on connected TVs, and cited Nielsen data showing that YouTube accounts for over 50% of ad-supported streaming watch time on CTVs among people 18 years and older.
“And over 35% of viewers in this group can't be reached by any other ad-supported streaming service,” Schindler said. “In other words, we're seeing that when users choose to watch ad-supported CTV, they choose to watch YouTube, and YouTube delivers CTV audiences that advertisers can reach anywhere else.”
Later this year as part of a collaboration with Nielsen, the company plans to allow brands to directly compare their YouTube reach to linear TV, and measure co-viewing.
“This apples-to-apples comparison will be a game changer in helping advertisers make smarter investment decisions,” Schindler commented.
As for YouTube Shorts – where users can create short-form content – daily views are now averaging over 30 billion, four times as many as a year ago, according to Pichai.
“In the first quarter, we added new capabilities to video editing, and we are continuing to invest in making Shorts a fantastic experience for creators and viewers alike. As we've always done with products, we focus on building a great user experience first, and we will work to build monetization over time,” he said.
Google is testing out ads on YouTube Shorts, and “are encouraged by the early results,” Schindler noted.
Alphabet consolidated revenues in Q1 were $68 billion, up 23%