Alphabet’s earnings were held back by its advertising revenue, which continue to feel the pinch in a challenging economic climate.

The company’s revenue grew by only 1% year-over-year over the three months ended Dec. 31 (7% on a constant currency basis), falling below analyst expectations. For the full year, revenue grew by 10% (14% on a constant currency basis).

The slim growth was largely due to the company’s advertising business, where revenue declined by 4% year-over-year in Q4. Revenues from Google Search and related ads were down 2%, YouTube was down by 8% and the broader Google ad network was down 9%.

In an investor call, Philipp Schindler, Alphabet’s SVP and chief business officer, said that excluding exchange rates, revenue in Search was actually up, thanks to increases in spending from retail and travel brands, though some advertisers are continuing to pull back spending, particularly in finance. The YouTube segment was also hit particularly hard by ad spending pullbacks.

Ruth Porat, Alphabet’s CFO, said the economic climate that impacted the company’s ad revenues, particularly in the second half of the year, are expected to continue into 2023. To deal with that, she says the company plans to incorporate AI advances for users and advertisers to deliver better measurement and higher ROI, as well as tools for helping advertising create more compelling content.

The company is also prioritizing continued growth in the YouTube Shorts segment, with an eye towards improving engagement and monetization.

Earlier this month, Google announced that it would be laying off 12,000 people. While this was done to manage long-term costs, the company expects that severance other charges related to the layoffs to total between $1.9 billion to $2.3 billion USD, the majority of which will be part of its Q1 results. The company also expects costs in the area of $500 million USD related to downsizing its office space.