Many times we have seen how a single update of iOS can trigger the losses of major internet giants. And this time the tale has been repeated again…
Apple's new privacy changes raise concerns for Youtube and Facebook. Google claimed Apple's privacy measures had a minor impact on its video site, but its executives indicated that direct-response ad growth has slowed.
Read the article to the end to find out more about the news and updates.
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Since the beginning of this year, investors have been concerned about two forces that are threatening Facebook's business: the ban on targeted advertising on iPhones and the growing popularity of TikTok. These concerns could have also been targeted toward Google's YouTube.
In addition to the economic turmoil due to the conflict within Ukraine and the war in Ukraine, these tensions led to a sudden slowdown in sales for the world's biggest video streaming service, as well as a rare loss for the main company, Alphabet Inc. The stock fell 3% in extended trading Tuesday after Alphabet reported first-quarter earnings.
In the last year, Apple Inc. has upset social media firms by imposing strict restrictions on third-party advertisements on iPhones. This has impacted Meta Platforms Inc. while leaving Google somewhat unaffected since it's not as dependent on the form of targeted advertisements.
However, the site isn't YouTube. Prior to this, Google said Apple's privacy changes had had no effect on its YouTube site.
However, on Tuesday, its top executives stated that YouTube has seen a decrease in the growth of direct-response advertisements, which are the types of marketing that make use of targeting target customers.
YouTube's advertising was by far the weakest component of Alphabet's first-quarter earnings, posting only a slight increase of 14%, up to $6.87 billion, which is more than 500 million less than analyst estimates. The previous year, the video business reported a rise of 48% during the same period.
"YouTube [is] now feeling the sting," said Dan Morgan, a senior portfolio manager at Synovus Financial Management. It's a concern for the company's stock as YouTube, as well as Google's cloud division, "was expected to be the next leg of growth," said Morgan.
Google executives blamed some of the issues with YouTube for Russia's incursion into Ukraine. Unrest in Ukraine caused a "pullback" in spending across Europe, the CFO, Ruth Porat, said. Overall revenue in Europe and the Middle East increased by 19% in the first quarter, compared to 33% in the previous year.
In the month of February, Google shut down its operations for sales in Russia in response to the ongoing war. The company continued to offer its search engine and YouTube in Russia; however, the ban caused an "outsized" impact on YouTube's business, Porat said on a conference call shortly after the results were announced.
Porat stated that Russia accounted for about 1% of Google's total sales, but he declined to speculate on the duration of the effect." I think it's too early to comment," she declared. "Tragically, it is still ongoing."
While Google executives spoke about the conflicts and restrictions of Apple, however, they didn't mention an additional threat that could be a danger to YouTube: TikTok, the popular video platform made by Chinese-based ByteDance Ltd. that has made it necessary for Meta to invest resources in Facebook and Instagram and has challenged YouTube's dominance in the world of online creators.
Google's executives were enthusiastically discussing YouTube's response to TikTok—shorts. YouTube introduced the feature in the year 2020 to provide an option for short-form videos on its website and app.
The company made certain that no commercials were included in the shorts and also provided creators with an account based on their performance.
The ad-free test is over. YouTube is preparing to test ads within shorts, Google sales chief Philipp Schindler told investors. Schindler said that Google had been "encouraged by initial advertiser feedback and results."
The executives also praised YouTube's growth prospects in the field of online retail as well as on TV screens, two major areas for investment. The focus--and the questions of experts--were placed on the competition with TikTok.
"There was also a lot of enthusiasm about shorts in the era of TikTok, but clearly it's very early days for them," explained Joanna O'Connell, an advertising analyst at Forrester.
Google has announced that short videos receive 30 billion views per day, an increase of fourfold from the previous year. But the increase in viewership has sucked some of the viewers from YouTube's most popular longer videos, which is where the company earns all its profits, Porat said.
Porat explained that the business team of YouTube had been working toward "closing the gap" between the company's primary commercial product and its more experimental one that has a resemblance to TikTok. "So we're excited about the new opportunities with Shorts," she said.
