Google Cuts Marketing Budgets by 50%, Freezes Hiring.

Key Points

• Budget cuts and hiring freezes across marketing and across Google.

• An internal document reveals Google is cutting its marketing budgets by as much as 50 % for the second half of 2020.

• The marketing budget cuts may be a way to combat reduced advertising earnings in the wake of coronavirus.

• The development comes in less than a week from where Google is scheduled to discuss Q1 2020 results on 28th April.

 

Google is doing what other big tech companies are or will be doing soon to mitigate the coronavirus impact – cutting marketing budgets. An email viewed by CNBC, sent to the marketing employees this week was about budget cuts and a new hiring freeze for full-time and contract employees.

The e-mail 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.

In 2019, Google spent $18.46 bn which includes employee compensation. One important area that required advertising was Cloud, as it competes with Amazon and Microsoft by hiring more sales representatives.it is unclear how such areas will be affected that need wide consumer reach.

However, Google confirmed that some areas’ budgets are being cut but not every area will be impacted as it adjusts plans.

A company spokesperson said in an emailed statement to CNBC,

As we outlined last week, we are re-evaluating the pace of our investment plans for the remainder of 2020 and will focus on a select number of important marketing efforts….We continue to have a robust marketing budget, particularly in digital, in many business areas.

Sundar Pichai, CEO in his memo last week 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 emphasized that the company will not cut back in areas where consumers needed Google’s support for their growth and success. It will also continue with digital advertising which is in line with the stay at home audience.

Travel advertising  earnings plummets:

Recently, a search marketer who knows travel advertising well tweeted the collapse of travel-related advertising and one of the contributing factors to a negative impact on the 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

— Martin MacDonald 🏴󠁧󠁢󠁳󠁣󠁴󠁿🇪🇸🇺🇸🇧🇧 (@searchmartin) April 23, 2020

Following the news, Google shares had dropped nearly 2%.