Google JUST Announced Ads biz Buyouts - Uh Oh

Here's another exclusive from the

information. Google offers buyouts to

employees in search and ads unit. Okay.

Why is the search and ads unit so

important? Because it's the biggest

portion of Google's business. That's

where they make the vast majority of

their money. I'm a big fan of the Google

Cloud, you know, the Google AI services

that they have, uh, Gmail, obviously,

you name it. YouTube Premium, YouTube

itself. These are fantastic options.

YouTube Premium, a lot of these things

sit in these components here. I mean,

look at this. YouTube ads up over 20%.

This is a fantastic business. One of the

best acquisitions in the world when

Google bought YouTube. Google network

great ads on websites going down no

problem. Google subscriptions,

platforms, and devices exploding.

10 billion dollar divided by what we had

last year of 8739 puts us at 11.8%

year-over-year. In just a quarter, they

make a over $10 billion

in revenues for subscriptions. Google

Cloud another $12 billion. These are

fantastic. Their total revenues at 90

bill though tell you something very

pressing that their search and

advertising business represents 56% of

their business. And while it did

represent a gain from last year in

search and other, it's worth paying

attention to how artificial intelligence

is changing the Google search game. When

people are looking up encyclopedic

content and they're looking for quick

answers like what riots happened in

1992, a lot of people are turning to AI.

In fact, so much so that Google itself

now includes artificial intelligence

overviews to provide an AI search result

to you without you having to log into

GPT or whatever, which is great. The

downside is it kills your potential ad

revenues for getting website search

results and getting click conversion.

Now obviously there will be new

potential uh you know opportunities for

revenue. In fact some people talking

about getting click conversion through

the actual AI results themselves if

people are going to proceed to click. So

there are opportunities for innovation.

But the question is will Google will

will Google be the one who captures

those opportunities. We don't know. So

this is where this is actually very

interesting. Google offers buyouts to

employees in the search and ads unit.

Google is offering voluntary buyouts to

employees in the knowledge and

information organization which includes

some of the company's core search and

much much whoa much of the ads

organization. This is what happens. This

is exactly the cycle that happens.

Innovation through artificial

intelligence fosters creative

destruction. You create and innovate,

but you destroy jobs that previously

existed. That's how you end up with a

permanently higher unemployment rate.

And it's happening even more now at

Google. This report out, by the way, 12

minutes ago from the time of me

recording this. You can see right here

the clock, see

bringing it to you as it breaks. The

move comes as Google's search business

faces unprecedented threats from chat

GPT and following its loss in a US

antirust case that could hurt the

company's ability to distribute its

search project. Uh this also, you know,

relates to Google's potential problems

with maintaining Google Chrome or

potentially having to sell out Google

Chrome. What I always think is really

funny is if you're on a Windows PC and

you type into uh Microsoft Edge,

download Chrome, there's like this big

banner that pops up that's like there's

no need to download Chrome, use

Microsoft Edge and I'm like ah still

going to use it.

All right. Earlier this year, some of

our teams introduced a voluntary exit

programs with severance for US-based

Googlers and several more are now

offering the program to support our

important work ahead. The buyouts could

pre be a prelude to layoffs. That's

right. You don't take the buyout. We

still need to get our EPS to grow. So,

what are we going to do? We'll just fire

your bum.

Sad. In January, Google offered similar

voluntary bow members to a 20,000 person

platform and devices team which oversees

Android, Chrome, and Pixel. By April,

Google laid off hundreds of employees in

the unit. Ah, see buyout to layoff. the

information previously reported,

including 10% in its privacy sandbox

division, which was supposed to help

usher in a more privacy safe version of

digital advertising. Oops. Google

recently already made a small number of

cuts in its ads organization. At the end

of May, Google laid off employees in its

ads safety division. According to a

person with knowledge of the matter,

earlier in May, Google laid off around

200 employees in its Google businesses

organization, which handles advertising

and sales from other partnerships.

Google's peace meal cuts this year

differ from its approach in 2023 when it

cut 12,000 employees or 6% of its staff.

One of the reasons you're seeing this

sort of more peace meal cutting is

because cutting while you're making big,

you know, profits and the stocks are

doing decent uh is widely unpopular in

front of juries and judges who are

declaring some of the fates uh or or you

know outcomes of antitrust matters

regarding Google. So, you kind of don't

want to be seen as firing people. This

is why these voluntary buyouts are an

interesting option, especially since if

you laid people off, you'd probably give

them a cushy severance anyway. And a

buyout would also just be another way of

you kind of self- selecting your your

severance, if you will. So, it's like

it's going to happen either way. It's

either we choose or you choose is sort

of what it feels like. Uh backdoor

layoffs, if you will. Oh, they're

voluntary buyouts. They're not they're

not layoffs, but it does suggest some

concern for a part of a business that

represents about 56% of their revenues.

Mostly because if this segment, and I

don't know that it'll happen

immediately, but over time, I think the

writing is on the wall to where you're

going to see growth in search and others

start slowing and declining, especially

the ad side. uh and after you see uh the

Google search ad side decay which you

know Google search mind you 50.7 divided

by 66.8 I mean, Google search represents

76% of Google's advertising business.

Let me say that one more time just so

you remember that of Google's search or

advertising revenue, search represents

76%

of all of the dollars they earn. So, you

know, losing search as a major driver of

of ad revenue because advertisers are

going elsewhere and they're advertising

on Netflix or Disney or I mean to some

extent some will get picked up by

YouTube or they're using influencers or

whatever. That's fine. Uh you'll get

picked up somewhere else, but losing

search itself is going to be met with a

big negative followed by yes, growth in

other categories. But how many years

does it take to to basically undo the

damage that's done to search? It could

be seven years of low returns until they

actually return to meaningful and

broader growth again. Uh in other words,

for for the near term, some of Google's

mega desiraability could in the near

term be behind it if this advertising

revenue ends up leveling off. Who knows?

Maybe it won't. Maybe they'll be able to

pull off some kind of save here. But I

do think that's a red flag, not just for

Google, but also for the broader

economy. Something to pay attention to.

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