Google ad revenue growth slows amid price 'headwinds'

Internet's dominant company is not growing traffic volumes to make up for downward ad prices.

Google: Q1 ad revenue reached $30.72bn
Google: Q1 ad revenue reached $30.72bn

Google’s ad sales growth slowed in the first three months of 2019, according to the latest earnings report from parent company Alphabet. 

Advertising revenues for Google grew by 15% to $30.72bn (£23.69bn) for the three months ending 31 March. This compares with 20% growth in the fourth quarter of 2018 and 24% growth in the first quarter last year. 

It is Google's slowest quarterly ad revenue growth in three years:

Ad revenue makes up 85% of Alphabet’s total revenue of $36.34bn, which grew 17% year on year. Google’s ad business sells links, banners and ads across its own platforms, as well as those of partner clients.

Monica Peart, eMarketer’s senior forecasting director, said Google’s ad revenue growth had been expected to slow this quarter because of "downward pressure on ad prices, especially for revenues coming from international markets".

"The company was still experiencing tailwinds at this time last year and is now experiencing headwinds on ad prices, making for a less rosy year-over-year comparison," she added.

Worse for Google, the company is not growing traffic volumes to make up for downward ad prices. Alphabet reported that paid clicks on Google properties grew only 39% compared with a year ago, down from the previous two quarters, when paid clicks growth was 66% and 62% respectively.

On a call with investors, Alphabet’s chief financial officer, Ruth Porat, said video-sharing platform YouTube represents the vast majority of paid clicks.

Alphabet's operating income of $6.61bn for the quarter was also hit by a $1.7bn fine by the European Commission last month for antitrust violations. It is the third time European competition regulators have imposed a fine on the company.

Shares in Alphabet fell by about 7% in after-hours trading after its earnings fell below analysts’ estimates.

However, Google is estimated to remain by far the world's biggest internet advertising company this year, with a global market share of 31%, compared with Facebook's 20%, according to eMarketer figures. Google is also expected to capture an estimated 61% of the $141.2bn online search market and 35% of the $232.1bn mobile ad market.

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