Search Ad Revenue Rebounds After Unprecedented Q1 Slump

09 Aug, 2023 Google News, Paid Search

When you hear the number 84.4 billion regarding money, it sounds massive. However, this is an underwhelming number for the ad revenue the U.S. gained from searches in 2022. In 2021, there was a record-breaking gain in all forms of internet ad revenue at 35%, while in 2022 only went up by under 11%, according to IAB.

Why Did Search Ad Revenue Slow Down?

As underwhelming as the percentage of gain was, some expected these numbers in 2022 due to the uncertain economy, regulations, and many other factors. The global economy continued to be disrupted by the ongoing COVID pandemic, leading many companies to be more cautious when spending money on advertisements.

The Future Of Search Ad Revenue

Even though the amount of search ad revenue gain was considered underwhelming to some, search is still the leading format of ad revenue gain. Search has made $20 billion more than any other advertising format and recorded a 7.8% year-over-year increase.

CEO of IAB David Cohen said, “Looking ahead, there is definitely still growth to be had, but it will be harder to achieve and likely less than we have become accustomed to.”

As quarter 1 of 2023 has already happened, we can see changes in search ad revenue. Google, the search engine with the highest ad revenue, increased by about 2% from Q1 of 2022 to Q1 of 2023. However, YouTube ad revenue decreased by 2.6% from Q1 of 2022 to Q1 of 2023.

Using the Trends to Look Ahead

We can infer that search ad revenue will continue to increase by a smaller percentage than in prior years. Unless there is a massive shift in the U.S. economy, search ad revenue will continue to increase less and less each year.

However, Google emerged from an unprecedented advertising slump in its latest quarter, signaling a return to a growth cycle crucial for fueling investments in artificial intelligence technology. This technological advancement is expected to reshape the competitive landscape.

The financial results for the April-June period, released by Google’s parent company, Alphabet Inc., mark a significant turnaround from a previous downward trend. During this period, there were concerns that Google was losing its financial strength while advances in artificial intelligence threatened to undermine the dominance of its search engine, which powers its digital ad empire.

However, Google managed to reverse the situation as its ad revenue, which had experienced year-over-year declines in consecutive quarters for the first time in history, rebounded with a 3% increase compared to the previous year, reaching $58.1 billion during the second quarter. This performance surpassed analysts’ expectations, as reported by FactSet Research.