Google's Ad Revenue Will Slide 5.3% This Year, eMarketer Forecasts

eMarketer says the travel industry represents the biggest culprit for Google's ad woes, thanks to the coronavirus pandemic.
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Google’s advertising revenue will suffer a 5.3% slump this year, according to eMarketer, which would represent the first decline in Google’s ad revenue since eMarketer began forecasting it in 2008.

Google’s advertising sales account for 80% to 85% of its parent Alphabet’s  (GOOGL) - Get Report revenue. So that 5.3% slide would be a big deal.

But the report didn’t have much impact on Alphabet’s stock price. Alphabet shares recently traded at $1,437.61, up 0.91%.

The stock has gained 35% over the past three months, compared to 33% for the S&P 500. Initial concerns about advertising hurt Google’s performance in March and April amid the coronavirus pandemic.

The No. 1 problem for Google is a drop in ad spending from travel companies, which have been battered by the pandemic, according to eMarketer.

“The biggest single culprit here is the travel industry, which has been both hardest hit by the pandemic generally, and has concentrated spending on Google in the past,” Nicole Perrin, principal analyst at eMarketer, told The Wall Street Journal.

“We have already heard statements from major travel companies, like Expedia  (EXPE) - Get Report, that normally spend billions of dollars on Google, mostly on search, that they are pulling back spending on Google and search, and that will continue for the rest of this year,” Perrin added.

Needham analyst Laura Martin estimated in March that about 11% of Google's search ad revenue comes from the travel industry.

Google’s total ad revenue has surged at double-digit rates in every year of its 22-year history , except for the 2008-09 financial crisis, when revenue climbed 8%, according to the Journal.