Google sees ‘long-term opportunity’ in commerce as retail boosts ad revenue

Alphabet, which owns Google, experienced a boom in the third quarter as its digital advertising competitors, including Facebook and Snapchat, struggled hard and missed revenue expectations. The social media category has been shaken by changes introduced by Apple that have made it more difficult to target and measure mobile ads on devices from iPhone manufacturers. Asked by an analyst about the impact of iOS updates on Tuesday, Alphabet’s CFO Ruth Porat said the impact on YouTube’s revenue so far has been “modest”, mainly impacting direct-response formats.

Elsewhere, Google maintained a strong momentum as the broader digital advertising market rebounded, showing how its reach and solid foundation in channels like search guarded against external disruptions during a volatile year. According to recent estimates shared by Magna, pure digital advertising revenue in the United States grew nearly 50% year-over-year to $81.5 billion in the first half. The renaissance was led by big consumer brands and small companies that first switched to the channel.

Amid this shift, commerce has become a more valuable element for Google, which manages a shopping guide in its core search operations and has built more shopping capabilities into apps like YouTube. With more people visiting stores again, the company is now exploring omnichannel opportunities that could make a clearer connection between the online and physical experience.

Also see: Google and Podcasts: The Next Big SEO Opportunity?

“Bricks and mortar [are] the undead. Instead, omnichannel is in full force,” CBO Schindler said in Tuesday’s conference call. “As a result, we’ve seen more advertisers incorporating in-store sales alongside e-commerce goals to drive omnichannel growth. Adoption has nearly doubled in recent years.”

Schindler pointed to a “long-term opportunity” in commerce that includes search, YouTube, and more experimental offerings like Google Lens, an image-recognition technology application. When it comes to YouTube, Google is trying to bridge the gap between its creative community – there are now more than 2 million creators participating in the YouTube Partner Program – and purchases. Starting Nov. 15, the platform will host a one-week “YouTube Holiday Stream and Store” that will allow viewers to browse products and use offers, as well as interact with select creators. Walmart, Samsung, and Verizon are participating.

TikTok, an increasingly formidable competitor, is pursuing a similar strategy through what it calls “community trading.” Facebook is also doubling its purchases but warned this week that some of the madness caused by the space pandemic is showing signs of slowing.

“[Now] things have opened up in a lot of places and people are making more and more personal purchases,” Sheryl Sandberg, CEO of Facebook, told analysts at an earnings conference. “That doesn’t mean e-commerce has stopped growing. Business is still online. But e-commerce is no longer growing at the rate it was at the height of the pandemic.”