- In the second half of the year, Google is cutting its marketing budgets by as much as half & hiring freezes happening across marketing and across Google.
In the second half of the year, Google is cutting its ad budgets by as much as half, according to internal documents seen by CNBC.
“Budget cuts and freezes are being hired around marketing and Google,” said one message sent to employees on Wednesday from a global manager. “We have been told, along with the rest of the marketing, to cut our budget by about half for H2.” A company spokesperson stated that some areas’ budgets are being cut by as much as half, but added that others might not be, as it is still being “recalibrated.”
“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,” a company spokesperson said in an emailed statement to CNBC Thursday. “We continue to have a robust marketing budget, particularly in digital, in many business areas.”
After hours of reporting, Google shares fell nearly 2 percent. The dramatic changes come a week after Alphabet CEO Sundar Pichai said Google would cut back some of its investments over the rest of the year in the wake of the COVID-19 crisis, beginning with recruiting. At the time, however, Pichai only said that it would recalibrate the recruiting “key non-business marketing” and “significantly slow down.” Such severe budget cuts or hiring freezes were not reported.
“We continue to invest beyond recruiting, but will recalibrate the focus and speed of our investments in areas such as data centers and computers, and non-business critical marketing and travel,” Pichai told employees in the memo.
The news also comes as the organization is battling economic headwinds exacerbated by the COVID-19 pandemic, which has thrown the global recession into practice. CNBC also noticed last week that the organization had begun cutting back on skills training programs for many of its staff. It also comes days before next Tuesday, the company is due to report its second-quarter earnings.
“We must slow down the recruiting pace while retaining momentum in a few strategic areas and embarking on the many people who have been recruited but have not yet begun,”
Google planned to increase marketing investment from the year previous to the pandemic. According to its most recent 10-k annual, the firm, which sets out marketing and sales expenses together, spent $18.46 billion on sales and marketing in 2019.
That includes product and service-related advertisement and promotional expenses as well as compensation for employees in sales and marketing. It increased its headcount by at least 15 percent last year, according to the annual report. Additionally, there has been a rise of $402 million in advertisement and promotional expenditures.
“As with the financial crisis of 2008, the entire global economy is struggling and Google and Alphabet are not resistant to the impact of this economic pandemic,” CEO Sundar Pichai said last week in a memo sent to workers. “We live in an environment of alliances and interconnected companies, all of whom experience immense pain.”
