Google’s massive travel advertising business could be hurt because the coronavirus outbreak is disrupting travel plans.
Needham & Co analyst Laura Martin estimated spending on travel search ads will drop US$1bil in the first quarter and US$3bil in the second quarter. Most of that money would have been spent on Google, which dominates the space. Travel ads make up 10% of all search ads and accounted for about US$10.7bil of Google’s US$98bil search revenue in 2019, Martin wrote in a Thursday note to clients.
The coronavirus is slowing economic activity and ad budgets are often one of the first expenses to be cut when companies tighten their belts. Alphabet Inc’s Google relies on millions of businesses, large and small, to buy ads on its search engine and on YouTube to keep revenue growing.
There are other signs of stress on the travel industry. Airline stocks have tanked, with United Airlines Holdings Inc falling 39% and Deutsche Lufthansa AG dropping 31% since the outbreak began. Booking Holdings Inc and Expedia Group Inc, two of Google’s largest ad buyers, have slumped, too.
Needham’s Martin kept her buy rating on Alphabet shares because she expects consumer spending and travel advertising will be "back to normal” by the second half of 2020.
- Bloomberg
Created by Tan KW | Aug 17, 2024
Created by Tan KW | Aug 17, 2024
Created by Tan KW | Aug 17, 2024