CNBC: Sundar Pichai, CEO of Alphabet and Google is interviewed by Deirdre Bosa.
“We definitely see uncertainty ahead, just like everyone else,” Pichai told CNBC’s Deirdre Bosa on Wednesday in an interview at Google’s annual I/O conference in Mountain View, Calif. “The great thing is that as a company we have been around for a while. [We] We’ve worked through moments like this, whether it’s 2008 or the early days of the pandemic, and we’re looking at the long term.”
He also said he thought the economy would “need time to work through the current high inflation”.
“What creates uncertainty is that there are so many different factors, be it supply chain problems or rising energy prices,” he said.
“I think people in certain sectors are seeing enlightenment,” he suggested, citing travel as an example. “But then you have other new areas that have problems, maybe because of supply chain constraints…Energy, for example, was a problem. In some cases, rents have gone up and food prices have gone up.”
The Nasdaq is heading for the strongest quarterly decline since late 2008, when the economy was gripped by the housing crisis. Consumer prices rose 8.3% in April, the Bureau of Labor Statistics said Wednesday, higher than expected and close to their 40-year high of 8.5%.
Shares of Google parent Alphabet have fallen by about 22% this year, while coinciding the rest of the tech sector fears of inflation and higher interest rates are pushing investors into assets perceived as safer during a potential downturn.
alphabets earnings fell short of analysts’ estimates in late April, largely due to a major miss on YouTube, which was hammered along with other digital advertising companies in the first quarter. Executives then pointed to weaker YouTube ad spend in Europe Russia invaded Ukraine in February.
“Of course, if you serve [ads] across the economy…many of the macroeconomic factors, such as GDP growth, also ultimately affect advertisers’ spending,” Pichai said.
Pichai said the economic story is not all doom and gloom. Building on the comments from Alphabet’s Chief Business Officer Philipp Schindler last month, he noted that people are on the move again, a key indicator for Google’s key ad unit.
“We definitely see travel recovering,” Pichai said. “There are signs that people are clearly moving after the pandemic, and so there is some return to normalcy. But what gives the uncertainty is that there are so many different factors, be it supply chain problems or rising energy prices. And trying to put it all together like that is where there’s uncertainty.”
Pichai pointed to the company’s technology investments as a vital way to keep its company strong in times of weakness, and did not indicate that the company plans to delay hiring or withdraw in certain areas. .
“We want to be resilient in moments like these. We’re really excited about the opportunities ahead. And so we’re investing. We’re continuing to hire people and bring in great talent. There are areas where we’re in where we’re seeing a secular transformation, such as the cloud and the transformation to digital [we] keep investing.”
Despite economic uncertainty and market volatility, Alphabet increased its research and development spending 22% from a year earlier to $9.1 billion in the first quarter.
He also cited the company’s diversification across many business units as a source of strength.
“We invest in fundamental technologies and we are in many areas. So in some ways we are diversified. Obviously we have important products like search and YouTube. We have computer products with Android, Play and our hardware devices. And the cloud is a a big area of opportunity for us too. So I think we’re exposed to many, many sectors. And we’re doing this globally as a company. And I think that allows us to take a long-term view and think through these phases.”
Sundar Pichai, CEO of Alphabet and Google, is interviewed by CNBC’s Deirdre Bosa.
Google kicked off its conference Wednesday with announcement of new smartphones and tease augmented reality glasses that use artificial intelligence to translate spoken words into text on the screen. Facebook parent meta and Microsoft also work on AR devices.
Google must spend money to keep up with competitors in a rapidly evolving market, especially with the rise of the short video service TikTok, which is immensely popular among younger consumers. Google’s response to TikTok, YouTube Shorts, is growing rapidly, reaching more than 30 billion daily views at the end of April, up from 15 billion in January.
“We need to respond to what users ask,” Pichai said. “We try to give them the best experience, so we feel challenged to do better.”
“We always have to be agile and adapt, and that’s how it feels every Monday when I come to work,” he said.
He also touched on the balance between freedom of expression versus content moderation on the internet, which has come to the fore new attention lately with Elon Musk‘s planned acquisition of Twitter†
“I grew up in a great democracy, and I think the importance of freedom of expression and giving people a voice is really fundamental,” said Pichai, who was born in India. “Search represents what’s on the web today. We only remove things that are against the law.”
He added: “In a product like YouTube, where we recommend content and where we can empower content, we have community guidelines. So we have clearly stated policies. And we’re taking action. And that’s basically what allows us to maximize freedom of expression, [to] help keep the platform safe for everyone involved.”
He also spoke about the company’s approach to content moderation. “I think it’s important to give people a sense of transparency. And there are many ways to achieve that. For example, we publish our Community Guidelines, or in the case of search, how our raters evaluate search quality, we publish that publicly .” He added, “I think it’s important to do it in a way that spammers and others trying to work around your products can’t do so well.”
As for Musk’s plans for Twitter, he said, “I’m an avid user of Twitter. I think it’s an extremely important product for the world. It’s helped me a lot. And I think it’s valuable to investing in it for the long term…. I think that’s important because it plays an important role in democratic society…. I’d like to see the product keep getting better.”