Ad Tech Briefing: Alphabet’s Q2 hints at ad tech’s declining profile in Google’s future

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Overall, Alphabet reported strong results for the period, with total revenue rising 14% year over year to $96.4 billion. 

Central to this performance was “Google Services,” which generated $82.5 billion in revenue (up 12%), largely driven by Search ($54.2 billion) and YouTube ($9.8 billion), as well as its nascent subscriptions business ($11.22 billion). 

However, the Google Network business, which encompasses ads served on third-party sites and apps (such as AdSense and AdMob), stood out as a weak spot when compared to Alphabet’s overall performance, as its only business unit to report a revenue decline. 

Total Google Network advertising revenue was $7.4 billion during the period, representing a 1% year-over-year decline. This segment accounted for approximately 7.7% of Alphabet’s total revenue and about 9% of Google Services’ revenue, continuing its gradual decline as advertisers increasingly prioritize owned-and-operated properties, such as YouTube and Search. In contrast, Google’s search and YouTube revenues increased by 12% and 13%, respectively, during the period, driven by demand for Shorts and CTV ads. 

The decline in Network revenues illustrates a shifting dynamic: advertisers are favoring platforms with richer AI-driven formats, more accurate targeting and better performance measurement capabilities — areas where third-party network inventory often lags behind.

While not insignificant, Google Network’s contribution is shrinking in relative terms, both in size and strategic focus. It is increasingly overshadowed by faster-growing, higher-margin businesses like Cloud, which posted a 32% year-on-year increase in revenues to hit $13.6 billion, and subscriptions, which collectively now account for more than $11 billion in quarterly revenue.

Overall, it demonstrates how Google Network is increasingly a legacy revenue stream, contributing less to growth and offering limited upside amid the company’s pivot toward AI-powered first-party surfaces, subscriptions and Cloud solutions. While its Google Network revenues likely remain a stable but fading line on the income statement, some might take the latest results as a cue that, despite its public rhetoric, the online advertising giant may pose a faint-hearted resistance in the upcoming remainder of its ad tech antitrust case, which recommences in mid-September.

Perhaps it is this notion that has spurred Marketecture CEO, and ad tech veteran, Ari Paparo to buy Google’s AdX, the ad exchange at the center of the Justice Department’s antitrust case. Promising to address industry woes — such as eliminating dynamic allocation, sharing log files and replacing account managers with AI — the latest GoFundMe count falls short of the reputed $1 million target. 

His real aim? He maintains that his goal is to highlight Google’s dominance, but more realistically, it is likely a bid to promote his upcoming book, “Yield: How Google Bought, Built, and Bullied Its Way to Advertising Dominance,” due for publication next week.

Numbers to know

• 25% or less: the amount of respondents that claimed their firms uses AI for new code generation, per an Aperiam Ventures survey. 
• $185,000: The potential annual salary of AWS software engineers, according to Amazon listings compiled by Business Insider.
• $7.3 million: The amount raised in a seed round of funding by Vaudit, formerly BlokID. 
• 5.6%: the amount of U.S. search engine traffic generated by LLMs, according to CMO Today. 

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