How The Crypto Winter Affects Google’s Ad Business

According to a report from CNBC, big tech company Google has been affected by the downside trend in the crypto market. The company recently published its Q3 2022, earnings report showing that its revenues decreased due to the decline in value across the nascent asset class.

In 2021, when the price of Bitcoin and other cryptocurrencies was in price discovery, crypto companies spent millions on advertisements and marketing. In particular, exchange platforms took advantage of the high prices of digital assets to attract new users.

Philipp Schindler, Chief Business Officer (CBO) for Google, acknowledged the negative impact of less spending from crypto companies and the financial sector:

In the third quarter, we did see a pullback in spend by some advertisers in certain areas in search. For example in financial services, we saw a pullback in the insurance, loan, mortgage, and crypto subcategories.

Crypto Bear Slowdown Google’s Ad Revenue

Data provided by CNBC indicates that the big tech company saw its worst Q3 in ad growth since 2013, except for a short period during the start of the COVID-19 pandemic. In addition to the crypto winter, the company highlighted unfavorable macroeconomic conditions.

In the U.S., inflation reached a four-decade high. This spike forced the Federal Reserve (Fed) to tighten market conditions, hike interest rates, and reduce global liquidity.

Consequently, the crypto market lost over 60% of its total market capitalization. Prominent cryptocurrencies, such as Bitcoin and Ethereum, crashed to their 2017 levels.

In the traditional market, the situation is equally gruesome. Over the past year, Google has recorded a 24% drop from a high of around $150 per share.

Crypto companies followed a similar trajectory. Coinbase (COIN) debuted in April 2021, and the stock reached an all-time high of $440, losing over 80% of its value in the coming year. At the time of writing, COIN’s price trades at $74.

Google Bets Big On Crypto

Google’s ad business shows the connection between the legacy and crypto sectors. The big tech company, and other technological behemoths like Microsoft and Meta, have been strengthening their foothold in the nascent industry.

Bitcoinist reported that Google invested $1.5 billion in crypto-focused companies from September 2021 to June 2022 via its parent company, Alphabet. Google is simply following the trend across traditional companies.

These entities invested over $6 billion in digital asset companies over the same period, according to a report from research firm Blockdata. The chart below shows that Alphabet invested in Dapper Labs, Vultage, Fireblocks, and the Digital Currency Group (DCG). The report noted the following on these investments and the potential strategy for traditional companies:

Alphabet and Blackrock are showcasing a completely different strategy by making concentrated bets on a smaller set of companies (…). Banks have started to increase their exposure to crypto and blockchain services (some more than others) given increased client demand. This has led them to make investments in crypto custody, asset management, and trading.