Google has faced significant challenges over the past year, including the rise of generative AI and increased regulatory scrutiny. The company has made major changes to adapt to these challenges, including realigning teams around AI and launching its own Gemini AI model. Google has also cut projects, laid off employees, and announced its first-ever dividend and a $70 billion share buyback alongside its Q1 2024 earnings. Despite these challenges, Google parent company Alphabet has maintained a $2 trillion market cap, making it the fourth most valuable public company in the world.
Unlike Meta, Google has found ways to monetize generative AI, such as helping advertisers target people with AI in its Performance Max tool. The company has also partnered with Discover Financial to roll out AI tools to call center agents and has seen success with Ikea in revenue from value-based bidding solutions. While Google has not yet started monetizing AI answers in Google Search, CEO Sundar Pichai expressed confidence in the company’s ability to manage the costs of providing these queries. Google is taking a measured approach to integrating AI into search to improve the user experience while also prioritizing traffic to websites and merchants.
Google’s core businesses continue to perform well, with the company reporting $23.7 billion in profit on $80.5 billion in revenue for Q1 2024. This represents a 15 percent increase in revenue year over year and a 14 percent increase in profit compared to the holiday quarter. Despite laying off over a thousand employees to boost profits, Google’s spending on severance and related charges has decreased, indicating that layoffs may have slowed or paused. Search and advertising revenue were up 14 percent year over year, YouTube ads were up nearly 21 percent, and subscriptions, platforms, and devices were up 18 percent, largely driven by premium YouTube subscriptions.
Google is also focused on improving its ability to compete with platforms like TikTok and Instagram Reels, with a significant increase in creators uploading YouTube Shorts shortform videos. The monetization rate of Shorts has also increased by 12 percent over the last quarter. Google is gearing up for its annual developer conference, Google I/O, which will take place on May 14th. The conference is expected to showcase the latest innovations from Google and provide insights into the company’s future direction. Despite the challenges it has faced, Google remains a dominant force in the technology industry and continues to adapt to changing market dynamics and regulatory environments.