COVID-19 is turning into a massive black hole that is gulping in the world economy relentlessly. And such is the pull, that even the biggest of multinationals with the largest of cash reserves are having to rethink their strategies. While Google hasn’t taken any drastic measures yet, it did announce a few days ago, to realign its priorities to cut on “non-essential” expenses. Now, if reports are to be believed, Google is rather moving on a more drastic footing than what was first anticipated.
According to internal memos accessed by CNBC, Google will be cutting its marketing budget by almost 50% for the second half of 2020. The tech giant has also put a hiring freeze in place for full-time as well as contractual employees.
“There are budget cuts and hiring freezes happening across marketing and across Google,” one message from a global director sent to marketing employees on Wednesday read. “We, along with the rest of marketing, have been asked to cut our budget by about half for H2.”
While Google hasn’t visibly gone into full combat mode yet, what was first assumed to be a “prevention” exercise seems to have attained much more importance. Although the company hasn’t started laying-off its employees, the realignment of budget, coupled with a hiring freeze, maybe a sign of things to come.
The news was confirmed by a Google spokesperson to CNBC, stating “some areas’ budgets are being cut by as much as half,” but added that “others may not be since it is still in the process of recalibrating.”
“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,” the 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.”
Google had initially planned to “realign investments towards profitable sectors like data centers and machines” that are seeing a surge in demand due to ongoing lockdowns, while also “slowing down” hiring. CEO Sundar Pichai, in a memo sent to the employees last Wednesday, stated that “Beyond hiring, we continue to invest, but will be recalibrating the focus and pace of our investments in areas like data centers and machines, and non-business essential marketing and travel.” But the exercise no longer looks as subtle as it seemed back then.
While the new measures are a sign of worry, the Google spokesperson told CNBC that the company was not imposing a widespread hiring freeze, but won’t be diverting details about the procedure.
“We’ll be slowing down the pace of hiring while maintaining momentum in a small number of strategic areas, and onboarding the many people who’ve been hired but haven’t started yet,” the spokesperson said in a statement.
Google had expected an increased marketing revenue for FY-2020, as compared to last year. The company had spent $18.46 billion on sales and marketing in 2019, with an addition of $402 million for advertising and promotional expenses.
