The cuts to the marketing budget may be a way to contain the wildfire of reduced advertising earnings due caused by the COVID-19 pandemic.
This development comes less than a week from when Google is scheduled to discuss the first quarter 2020 financial results on April 28th.
Cuts and Hiring Freezes in Marketing
According to an email seen by CNBC, Google is instituting cuts the marketing budget across a range of Google divisions.
The email stated:
“There are budget cuts and hiring freezes happening across marketing and across Google… We, along with the rest of marketing, have been asked to cut our budget by about half for H2.”
Google confirmed they were “re-evaluating” their marketing efforts, as was announced by Google CEO Sundar Pichai last week.
Bloomberg News received a copy of the memo Pichai sent last week about looming cuts where he stated:
“The clear lesson from 2008 is that preparing early is key to weathering the storm and emerging in a position to continue long-term growth…
We are reevaluating the pace of our investment plans for the remainder of 2020. That starts with taking a more critical look at the pace of hiring for the rest of the year.
…we continue to invest, but will be recalibrating the focus and pace of our investments in areas like data centers and machines, and non business essential marketing and travel.”
Sundar’s announcement last week emphasizes that Google will not cut back in areas where users and businesses continue to need Google’s support for their growth and success.
So it follows that cutting back on the marketing budget may not affect support for current customers and businesses.
Travel Advertising Slump May Have Impacted Earnings
According to a tweet by a search marketer familiar with travel advertising, the collapse of travel related advertising may be one of the several contributing factors to a negative drag on earnings.
When nearly 10% of your business is as a performance marketing supplier to Expedia and Priceline, and they stop advertising, the knock on effects are strong: https://t.co/TKNFl3YgOs
— searchmartin (@searchmartin) April 23, 2020
Google shares are reported to be down by 2% in after hours trading:
Google shares now down 2% after hours on news of marketing budget cuts, hiring freezes. https://t.co/BfKNWU2HLw
— CNBC (@CNBC) April 23, 2020