- The COVID-19 coronavirus outbreak is having a massive impact on the world economy, having recently been the impetus in the US alone for a $2 trillion stimulus package passed by Congress.
- Analysts are starting to think the virus is going to cause something to happen at Google that’s never happened before — a year-over-year decline in quarterly advertising revenue.
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The big tech giants have already started acknowledging how much of a bite the coronavirus pandemic is going to eat out of their revenue, with Facebook disclosing a massive hit and Twitter totally scrapping its previously offered financial estimate for the first quarter.
And then there’s Google, where analysts are starting to project that the impact of the deadly virus is going to do something that’s never happened before at the search giant whose fortunes still rely so heavily on advertising. Indeed, some analysts think Google will show its first-ever decline in ad revenue when it reports results for the upcoming quarter.
“We’ve cut our Google revenue and earnings numbers three times in the last three weeks, and we now think Google will face its first-ever year-over-year decline in ad revenue in the June quarter,” RBC Capital analyst Mark Mahaney told Business Insider. “We have them down 5% year over year, for the first time ever.”
The temporary collapse of the travel and hospitality industries is believed to be a big part of the reason why. Mahaney’s estimate is that Google gets between 10% and 15% of its revenue from those industries. That encompasses everything from Expedia bookings to airlines and hotels, as well as rental cars and cruise ships. Mahaney’s second-quarter revenue estimate for Google’s parent company Alphabet is $37 billion, down from $39 billion during the same period in 2019.
These projections come at the same time as Cowen & Co. analysts are predicting Google and Facebook (the two members of the so-called ad duopoly) will lose more than $44 billion in combined ad revenue this year. “Our business is being adversely affected like so many others around the world,” Facebook acknowledged in a blog post from a few days ago. “We don’t monetize many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19.”
Another factor driving that loss for Google is the postponement of the Tokyo Summer Olympics to 2021, one more opportunity for massive ad spending that Google will lose this year.
Something is also happening at Google that’s similar to the US media industry, which is seeing massive spikes in viewership and audience traffic while at the same time ad spending has fallen off a cliff. “I think advertisers are pulling back from YouTube like every other channel, but I’m sure consumers are binging on YouTube,” Mahaney told BI. “So I think they’re seeing more usage across their properties, just less monetization.”
