Google Q2 2024 Earnings: Search Still Strong, Display Struggles

Google’s Q2 earnings report for 2024 presents a nuanced picture of its advertising revenue streams. While search and YouTube advertising continue to grow, the display network has faced some challenges. Let’s dive into the specifics of these changes and explore the potential impacts of AI on Google’s advertising ecosystem.

Overview of Q2 Earnings

Search revenue climbed a substantial $5.9 billion year-over-year, reaching $48.5 billion for the quarter. This growth is attributed to increased search volume, higher advertiser spending, and ad format improvements. It’s a testament to Google’s stronghold on search.

On the YouTube front, ad revenues grew by $998 million, or 13%, in Q2 2024 compared to the previous year, reaching approximately $8.7 billion. This growth was fueled by ad buys from both brand and direct response advertisers. In previous earnings reports, I’ve written about how Google is trying to lure brand over direct response advertisers to the YouTube platform. Based on these earnings they may be doing a better job of taking direct response dollars. (PMAX anyone?). This is a trend I will look for in future earnings reports to see where the growth truly comes from.

However, the Google Network properties, which encompass display and in-app advertising, experienced a revenue decline of $406 million in Q2 2024 compared to Q2 2023. This decline was primarily due to reduced revenue from AdMob, Google’s mobile advertising platform. It is also worth noting that the dip in Google Network revenue, combined with the increase in YouTube revenue, means that YouTube’s revenue has now surpassed that of the Google Network.

Display Network: Signs of Weakness

Among Google’s advertising channels, the display network is the only one showing signs of weakness. Impressions in Q2 2024 dropped by 17% compared to the same period last year, but CPM (Cost-per-thousand) increased by 13%. This suggests two key factors at play:

1. AdMob Quality Adjustments: Due to Google’s recent policy change, advertisers can no longer target specific apps, impacting display ad buys. As a result, I’ve personally shifted away from app-based advertising. So, this quarter’s results may reflect a broader industry trend in ad buying.
2. Impact of AI Overviews: The advent of AI-driven overviews might be steering traffic away from traditional publishers. This shift results in fewer impressions on the display network. If AI summaries provide direct answers and guide searchers away from relevant content, publishers relying on Google for traffic may experience a decrease in impressions.

AI and Its Impact on Google’s Advertising

Contrary to some expectations, AI overviews did not negatively impact search advertising revenues. In fact, Google Search & other revenues increased significantly. This indicates that despite AI’s role in altering search dynamics, advertisers still find value in search ads. This is likely due to enhanced targeting and relevance brought by AI technologies.

However, the display network’s performance suggests that advertisers are becoming more savvy with their mobile ad buys. There is also the possibility that AI might indirectly reduce impressions by changing user behavior and content consumption patterns. This area warrants close observation in the coming quarters to understand AI’s long-term impact on Google’s advertising revenue.

Looking Forward to Q3

Google’s Q2 earnings report highlights robust growth in search and YouTube advertising, underpinned by increased advertiser spending and improved ad delivery mechanisms. However, the display network faces challenges, primarily driven by changes in app targeting policies and potential shifts in user behavior due to AI overviews. As we look forward to Q3, it will be crucial to monitor the impact of AI on paid search and display advertising. The evolving landscape offers both opportunities and challenges for marketers aiming to leverage Google’s vast advertising ecosystem.