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[size=5][b]Needham lowers Google estimates amid ‘search weakness’ and growing threat from Amazon
Needham analysts said Tuesday they were lowering revenue estimates for Google’s second quarter because of declining U.S. search revenue.

Analysts also lowered estimates for Google’s fiscal year 2020 and 2021.

Needham analysts Amazon represents a “structural attack against Google’s-search product, not just a COVID-19 related problem.”

Needham analysts predict Google’s second quarter revenue will be down 7% year-over-year because of the company’s declining U.S. search revenue. That’s a downgrade from the firm’s previous expectations of a 5% drop.

In June, eMarketer estimated that U.S. net search ad revenue would drop 7.2% this year. Needham analysts said they agree with the firm’s call for declining U.S. search revenue, and said their sources suggest international ad revenues are down even more than in the U.S.

Google’s ad weakness is being driven by “material declines in travel, auto, entertainment, media and retail ads — both search and video ads,” Needham analysts said.

“Until COVID-19 is controlled enough that the economy strengthens and consumer demand returns,” analysts said they expected those travel, entertainment, media and retail categories would remain weak.

Needham now expects Google’s revenue to be flat or slightly down for the full year. It previously expected growth of between 2% and 3%.

Last year in the U.S., Google held 31.6% of total digital advertising spending with Facebook and Amazon holding 22.7% and 7.8% respectively, according to eMarketer. This year, the firm expects Google to claim 29.4% of digital ad spending with Facebook and Amazon holding 23.4% and 9.5%, respectively.

Needham analysts believe that though Google search will report a falling share of digital ad revenue this year, it will be more because of Amazon, not Facebook. They pointed to the growing number of brands that are currently boycotting Facebook advertising, and said they expect this boycott to last through the elections in November. They also said “many small businesses will not survive Covid-19.”

“Both of these data points suggest that ad revenue growth at FB in 2020 will be challenged,” they wrote.

They said Amazon is the “better reason” Google search ads are losing market share, since it represents a “structural attack against Google’s-search product, not just a Covid-19 related problem.” Analysts cited figures for Amazon Prime members, saying that 70% of Prime members say they begin product searches on Amazon and spend an average of $1,400 a year.

“We expect [Amazon]’s total ad revenue to grow more rapidly than we estimated pre-COVID because consumers are spending more time on AMZN during COVID-19, which increases its digital advertising ROI and attracts incremental search advertisers,” analysts wrote.
YouTube TV pricing[/b]

In late June, Google-owned YouTube said it was raising the price for its television subscription service to $64.99 a month, an increase of $15. The service, which allows customers to watch more than 80 TV channels over the internet, had 2 million subscribers as of the end of 2019, Google CEO Sundar Pichai said on the company’s Q4 2019 earnings call.

Needham analysts said the price increase could be because search weakness is encouraging Google to drive its ancillary businesses to break even more quickly, or because it’s trying to exit its “skinny bundle” business by encouraging consumers to disconnect (instead of just closing it down outright, which would risk irritating consumers).