Advancements in artificial intelligence and better performance in advertising helped Google parent company Alphabet have a better-than-expected Q1.
Overall revenue at the company was up 6% year-over-year on constant currency basis. Ad revenue was up 2% year-over-year, with a slight increase in search offset by corresponding declines in YouTube ads and the broader Google audience network.
Philipp Schindler, chief business officer, said advertiser spending pullback was most seen in the company’s broader advertising network, while growth in Search came from increases in travel and retail ads.
Despite ad revenue growth being somewhat small, the performance exceeded what analysts had been expected from the company, which had previously been posting disappointing quarterly revenue numbers amid a downturn in the ad market. The quarter also included a $2 billion USD charge covering severance and other costs related to layoffs the company announced in January, as well as a $564 million USD charge related to reductions in its office space globally.
In a call with investors, CEO Sundar Pichai focused heavily on AI and how it was being deployed throughout the company, including its Cloud division (which drove most the company’s fortunes in Q1), user-facing improvements in Search and tools that would help with programming.
But in advertising, Schindler said further developing the AI already being used in its products still represented a major opportunity for long-term growth.
“Advancements are powering our ability to help businesses, big and small, respond in real time to rapidly changing market and consumer shifts and deliver measurable ROI when it’s needed most,” he said, pointing to things like improved keyword relevance to improve ad performance and creating a more efficient ad bidding process.
He also pointed to the company’s performance media offering, where AI is helping advertisers achieve an average of 18% more conversions at a similar CPA, which is up five points in just over one year, thanks to new AI applications in underlying bidding, creatives, search query matching and YouTube Shorts.
