Google’s Ad Revenue Growth Slows as Industry Pressures Mount
Google’s advertising business is showing signs of slowing, despite a boost from U.S. election spending. The company’s latest earnings report reveals that while ad revenue is still growing, the pace has slowed compared to previous years. A mix of tough market conditions, rising competition, and regulatory challenges are putting pressure on Google’s core business, just as it pushes forward with its AI-driven transformation.
Overview:
- Google Ads revenue rose 10.6% year-on-year to $72.46 billion in Q4 2024, missing analyst expectations, according to parent company Alphabet.
- YouTube ad revenue grew 13.8% to $10.47 billion, but its growth rate slowed compared to the previous year. Google’s search ad business rose 12.5% to $54 billion, showing a less dramatic slowdown.
- Executives blamed the drop in momentum on tough comparisons with Q4 2023, when Asia-Pacific retailers drove particularly strong ad demand. AI remains a major focus for 2025, but Google faces fresh challenges.
Analysis:
Despite a major boost from U.S. election ad spending, Google’s core advertising business lost some steam in late 2024. YouTube, for example, saw almost double the amount spent on political ads compared to 2020, yet overall growth still slowed.
Alphabet’s CFO, Anat Ashkenazi, pointed to a tough year-on-year comparison, with Chinese retailers like Shein and Temu having heavily invested in digital ads throughout 2023. However, with growing regulatory scrutiny and higher tariffs under President Donald Trump, that spending spree could fade.
Meanwhile, Google is doubling down on AI, embedding AI Overviews into search and rolling out ads within the feature on mobile. AI also played a role in boosting Google Shopping, which saw a 13% increase in daily active users over the festive period.
But competition is heating up. Chinese AI firm DeepSeek is emerging as a serious rival, offering advanced generative AI at a lower cost. In response, Google launched Gemini 2.0 in December, positioning itself for what CEO Sundar Pichai calls the “agentic era” of AI.
Adding to the pressure, Google is also battling two major U.S. antitrust cases related to its search and ad tech business. The Justice Department has even suggested Google should sell Chrome, a move that could shake up the industry.
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