Google mulls slashing marketing budgets in half, hiring freezes for H2

Dive Brief:

• Google could cut its marketing budgets by as much as half in H2, along with enacting hiring freezes for full-time and contract employees, according to internal documents obtained by CNBC.
• An email from a global director at the tech giant said that there are “budget cuts and hiring freezes happening across marketing and across Google,” and that the director’s team — along with the rest of Google’s marketing department — ​had been “asked to cut our budget by about half for H2.”
• A Google spokesperson confirmed to CNBC that some areas of the company’s business are experiencing such cuts, but others are still being evaluated. The spokesperson denied hiring freezes, but would not detail why the director’s email mentioned them. Regardless, the measures appear more severe than what Google CEO Sundar Pichai previously indicated. Pichai last week said Google would recalibrate its “non-business essential marketing” and slow down hiring, per CNBC.

Dive Insight:

Google potentially slashing its marketing budgets by as much as half for H2 shows that big tech, though in some ways better insulated from the pandemic, is still feeling intense financial pressures at the moment. The news also signals that the economic effects of the coronavirus on advertising could endure through 2020, even as shelter-in-place orders in some states are loosened or lifted.

Google originally planned to increase its marketing spending this year, per CNBC. However, the coronavirus has led to a hard pullback in ad spending from categories like travel and retail, which help support Google’s core search platform and other properties. Google’s tech peers have felt similar disruptions, with Facebook late last month warning that its ad business was weakening due to plunging advertiser demand and despite a spike in user activity.

Cowen & Co. analysts estimate Google could lose up to $28.6 billion in revenue this year due to the coronavirus, or about 18% less than their pre-pandemic projections. U.S. search advertising overall could slide between 8.7% and 14.8% in H1 2020, and up to 29.4% in Q2, according to eMarketer.

Despite the headwinds, Google has stayed busy, and has continued ramping up its offerings in e-commerce related media. Earlier this week, Google made product listings through its Shopping portal free for merchants. ​The company was already investing in e-commerce to diversify revenue and better compete with Amazon, but online shopping has become essential for many businesses amid mass store closures.

Beyond controlling a massive share of digital advertising revenue through properties like search and YouTube, Google itself is a deep-pocketed advertiser, spending billions every year to promote its services and products like its line of smartphones and smart home hardware. Much of those dollars evaporating in the year’s second half could deal another blow to an already volatile ad market, digital channels included.

Google will report its Q2 earnings results on April 28.