Google is implementing huge budget cuts by the second half of 2020 amid the coronavirus pandemic. These include marketing funds and a hiring freeze.
First, the company is slashing its marketing budget by up to 50% until the end of the year for the remainder of 2020, according to internal materials as reported by CNBC.
The logo of Google is seen in Davos, Switzerland January 20, 2020. Picture taken January 20, 2020.
Google cuts its marketing and recruitment budget by up to 50% in 2nd Half of 2020
"There are budget cuts and hiring freezes happening across marketing and Google," a global director said in an email sent to employees on Wednesday, April 22. "We, along with the rest of marketing, have been asked to cut our budget by about half for H2."
This was confirmed by Alphabet CEO Sundar Pichai on Tuesday, April 21, that budgets in some areas are being cut by as much as half while others are still going through the calibration process.
Also, Business Insider has reported a statement sent by Google: "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 said Business Insider on Thursday, adding that the company will "continue to have a robust marketing budget, particularly in digital."
Hours after the news came out, Google shares dropped by about 2%.
The news comes as the company faces economic hurdles due to the coronavirus pandemic which has affected the global economy.
CNBC last week also found the company started pulling back on skills training resources for many of its workers. It also comes days before the company is scheduled to announce its second-quarter earnings next Tuesday, April 28.
Slowdown on recruitment
The announcement came a week after Alphabet mentioned that Google is slowing down on some of its investments for the remainder of the year.
However, a Google spokesperson said the company will not have a widespread hiring freeze. Instead, Alphabet CEO Sundar Pichai said Google would recalibrate "non-business essential marketing" and "significantly slow down" recruitment.
There are also reports that the company will reduce the salary of its overseas summer-interns by up to 50% by switching to local currencies.
"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," Pichai wrote in a message sent to employees last week.
The spokesperson added that they will keep the momentum in a few strategic areas instead.
Marketing (not) spending
Google is expected to increase its marketing spending from last year's expenses. But that was before the coronavirus crisis happened.
In 2019, the company spent a total of $18.46 billion on sales and marketing, according to its most recent annual financial statement.
The annual report shows that the company has increased its headcount by at least 15% last year. In addition, there was an increase in advertising and promotional expenses of $402 million.
"Just like the 2008 financial crisis, the entire global economy is hurting, and Google and Alphabet are not immune to the effects of this global pandemic," Pichai wrote in the note sent to employees last week.
"We exist in an ecosystem of partnerships and interconnected businesses, many of whom are feeling significant pain."
