Skift Take

Google is actively taking a new look at its business priorities, propelled by companywide bets on artificial intelligence. Google Travel is clearly an important part of its advertising business, but will it be as shiny as others?

While Alphabet, Google’s parent, saw advertising revenue tick down 1.6 percent in the fourth quarter, travel and retail revenue increased.

If you exclude a substantial adverse foreign exchange impact in the fourth quarter, which ended December 31, Alphabet’s “search and other” revenue, which includes advertising, would have increased “moderately,” said Chief Financial Officer Ruth Porat, “reflecting an increase in retail and travel, offset partially by a decline in finance.”

Alphabet announced the layoffs of 12,000 employees, or 6 percent of its workforce last month, and Google Flights seems to have been particularly hard hit on a percentage basis. That move came as Alphabet CEO Sundar Pichai said Thursday the company is “reengineering” its costs across the company.

“It also includes a careful focus on our hiring needs, reflecting these priorities as well as efficiencies in our technical infrastructure and productivity improvements from our AI (Artificial Intelligence) tools,” Pichai said.

Despite the layoffs in January, Alphabet hired 3,455 employees in the fourth quarter, with most in technical roles. Senior engineers and product managers were among those fired at Google Flights.

Porat, speaking in Alphabet’s fourth quarter and full-year 2022 earnings call Thursday, said advertisers reduced their spend in the fourth quarter compared with the third quarter. For full-year 2022, she added, cost per click rates on advertising declined 1 percent while the number of clicks jumped 10 percent.

In the fourth quarter, Google’s search and other revenue declined 1.6 percent to $42.6 billion. Net income in the fourth quarter fell 33 percent year over year to $13.6 billion.

In essence, Alphabet found that travel advertising trended upwards while some other sectors, including finance, were casualties of macroeconomic conditions and uncertainties.

Such trends are consistent with a new Tripadvisor study that found that roughly 75 percent of survey respondents who plan to tamp down discretionary spending in 2023 plan no such cuts in their vacation budgets.

Meta, the parent of Facebook, Instagram and WhatsApp, reported similar trends regarding travel revenue a day earlier.

“The largest positive contributors to year-over-year growth in Q4 were the travel and health care verticals, though both are relatively smaller verticals in absolute share,” Meta Chief Financial Officer Susan Li told financial analysts Wednesday’s during the company’s fourth quarter and full-year 2022 earnings call. 

Alphabet’s earnings call was rife with talk about how it will use artificial intelligence across its businesses to maximize efficiencies, including increasing conversions for advertisers, and to foster new opportunities.

“In 2022, AI advances boosted bidding performance, allowing us to move advertiser outcomes down the funnel to drive better ROI and use budgets more efficiently,” said Alphabet Chief Operating Officer Phillipp Schindler.


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Tags: advertising, alphabet, artificial intelligence, earnings, facebook, google, google flights, google travel, instagram, meta, online travel newsletter

Photo credit: A guest listens to one of the many records available to borrow in the lobby of the Jams Music Hotel in Munich, Germany. Travel revenue increased for google in the fourth quarter of 2022.

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