Alphabet has posted disappointing Q4 2022 results that missed analysts’ expectations as YouTube ad revenue declines again.
Alphabet posted quarterly revenues of $76.05 billion, up just 1%, with net income of $13.62 billion (down 34% in Q4 2021). YouTube ad revenue was $7.96 billion in Q4, down 7.8% from $8.63 billion year over year. Analysts expected a decline in YouTube ad revenue, but not such a sharp one.
The company’s second consecutive quarter of year-on-year ad revenue declines “is extremely worrying and highlights the popularity of rival services like TikTok and Facebook Reels for short-form content,” says analyst Paolo Pescatore. Alphabet recently announced more than 12,000 layoffs earlier this year, shedding about 6% of the company’s global workforce.
Alphabet CEO Sundar Pichai said the layoffs were necessary to “re-engineer our cost structure in a durable way and to build a financially sustainable, vibrant, growing business” across the suite of Alphabet subsidiaries.
Pichai says YouTube subscriptions in particular are experiencing great ‘momentum,’ though he doesn’t break out exact numbers. In November 2022, he revealed YouTube Music and YouTube Premium subscriptions topped 80 million paying subscribers across the two combined services.
Despite the decline in ad revenue, YouTube Shorts now averages over 50 billion daily views, up from the 30 billion daily views announced in early 2022. The new YouTube Shorts ad revenue sharing program is now active for creators, giving them a 45% split, based on their total share of Shorts views for the month. YouTube offers creators 55% of the revenue for long-form videos under its YouTube Partner Program.
YouTube is facing stiff competition from TikTok especially as the Chinese-owned company takes aim at YouTube’s video dominance. Facebook has been able to chip away with Facebook Live and Instagram Reels, but TikTok is the real threat as the company continues to expand how long videos can be on its platform. Soon, it will be an alternative video platform rather than one focused just on short-form videos—and that worries YouTube mightily.