Google could cut marketing budget 'by half' this year

Google reportedly plans to reduce its marketing budget as the world’s biggest advertising company scales down its own brand messaging amid the coronavirus pandemic.

Citing an internal email from an unnamed global director at the company, CNBC reported that Google is cutting its marketing budget by as much as half for the second half of 2020 and is implementing a hiring freeze for full-time and fixed-term contract employees.

A Google spokeswoman said: "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. We continue to have a robust marketing budget, particularly in digital, in many business areas."

Sundar Pichai, chief executive of Google’s parent company Alphabet, had signalled last week that Google would pull back on some investments for the rest of the year due to the pandemic. But the internal email suggests that Google is putting the brakes on more than "non-business essential marketing", as Pichai had said in a memo to employees.

Google spent $18.5bn (£14.8bn) on sales and marketing and increased its headcount by 15% last year, according to Alphabet’s 2019 annual report. The company is expected to disclose its 2020 first-quarter earnings at the beginning of May.

Michael Levine, an analyst at reseatch company Pivotal, said the disclosure was important because Google is a barometer of the internet and the company is "in the most educated position of any of the ad companies we follow, given their longevity and depth of knowledge seeing underlying data".

"We had already estimated sales and marketing growth to slow from 13% in 2019 to 6% in 2020 given Covid – $19.6bn vs $18.5bn in 2019," Levine added.

A decrease in marketing spend would have a knock-on effect for the many advertising and media agencies that Google employs. WPP’s Essence has made its name as Google’s digital media agency, while OMD UK handles offline media buying. Its main consumer advertising agency in Europe is 72andSunny Amsterdam, while Publicis.Poke has been the main business-to-business creative shop and R/GA London a favoured agency for digital projects.

Google also has in-house agencies, such as Brand Studio, which is meant to communicate the internet giant’s vision and strategy, and Google Creative Lab, which is styled as part-think tank part-innovation studio, and has won industry awards such as the Cannes Lions Design Grand Prix last year.