Google CEO Sundar Pichai said while consumers are putting the Covid pandemic in the rearview mirror, the economy is clearly a growing concern for the company and the broader market.
“We definitely see uncertainty ahead, like everyone else,” Pichai told CNBC’s Deirdre Bosa in an interview Wednesday at Google’s annual I/O conference in Mountain View, Calif. “The good thing is that we have been around as a company for a while. [We] we have been through past times like this, whether in 2008 or the early days of the pandemic, and we are taking a long-term view.
He also said he thought the economy would “take time to overcome” the current high rate of inflation.
“What gives uncertainty is that there are so many different factors, whether it’s supply chain issues or rising energy prices,” Pichai said.
“I think people are seeing relief in certain sectors,” he suggested, citing travel as an example. “But then you have other new areas that present problems, perhaps due to supply chain constraints. … Energy has been a problem, for example. In some cases, rents have risen and food prices. »
Watch the full interview on CNBC Pro.
The Nasdaq is heading for its biggest quarterly decline since late 2008, when the economy was in the grip of the housing crisis. Consumer prices jumped 8.3% in April, the Bureau of Labor Statistics said Wednesday, higher than expected and close to a 40-year high of 8.5%.
Shares of Google’s parent company Alphabet have fallen around 22% this year, falling alongside the rest of the tech sector as fears of inflation and higher interest rates push investors into considered assets as safer in the event of a potential downturn.
Alphabet’s gain at the end of April fell short of analyst estimates, largely due to a big miss at YouTube, which was hammered along with other digital ad companies in the first quarter. . The executives pointed to the drop in ad spending on YouTube in Europe after Russia invaded Ukraine in February.
“Of course, when you serve [ads] across the economy…many macroeconomic factors such as GDP growth also end up affecting advertiser spending,” Pichai said.
He said the economic story isn’t all bleak. Building on comments from Alphabet chief commercial officer Philipp Schindler last month, Pichai noted that people are on the move again, an important indication for Google’s core advertising unit.
“We are definitely seeing travel recovering,” Pichai said. “There are signs that people are clearly moving after the pandemic, and so there is some return to normal. But what gives uncertainty is that there are so many different factors, whether it’s supply chain issues or rising energy prices. And so trying to add it all together is where the uncertainty is. »
Pichai pointed to the company’s technology investments as a key way to maintain its business strength in times of weakness, and did not indicate the company plans to slow hiring or pull back in particular areas.
“We want to be resilient in times like this. We are very excited about the opportunities ahead. And so we invest. We continue to hire, bringing in great talent. There are areas where we are seeing a secular transformation, such as the cloud and the transformation to digital. Thereby [we] continue to invest.
Alphabet increased its research and development spending by 22% in the first quarter from a year earlier to $9.1 billion, despite economic uncertainty and market volatility.
He also cited the company’s diversification into many business sectors as a source of strength.
“We invest in fundamental technologies and we are present in many fields. So in some ways we are diverse. Obviously, we have important products like search and YouTube. We have computer products involving Android, Play and our hardware devices. And the cloud is also a big area of opportunity for us. So I think we’re exposed to a lot of sectors. And we do it globally as a company. And I think that allows us to take a long-term view and think about those phases. »
Sundar Pichai, CEO of Alphabet and Google interviewed by CNBC’s Deirdre Bosa.
Google kicked off its conference on Wednesday by announcing new smartphones and teasing augmented reality glasses that use artificial intelligence to translate spoken words into on-screen text. Parent Facebook Meta and Microsoft are also working on AR devices.
Google needs to spend to keep up with competitors in a rapidly changing market, especially with the emergence of short-form video service TikTok, which is immensely popular among young consumers. Google’s answer to TikTok, YouTube Shorts, is growing rapidly, attracting more than 30 billion daily views at the end of April, up from 15 billion in January.
“We have to respond to what users are asking for,” Pichai said. “We try to give them the best possible experience, so we feel challenged to do better. »
He also pointed to “things like Snapchat, Pinterest – all of that didn’t exist a few years ago,” and said smartphones and the mobile ecosystem are creating all kinds of new opportunities. .
“We always have to be nimble, and we have to adapt, and that’s how I feel every Monday when I come to work,” he said.
He also touched on the balance between free speech and moderation of content on the internet, which has received new attention lately with Elon Musk’s planned acquisition of Twitter.
“I grew up in a great democracy, and the importance of free speech and giving people a voice is, I think, really fundamental,” said Pichai, who was born in India. “Search is 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 and where we can amplify content, we have community guidelines. So we have clearly stated policies. And we act. And that’s what really allows us to maximize freedom of expression, [to] help keep the platform safe for everyone involved.
He also talked a bit about the company’s approach to content moderation. “I think it’s important to give people a sense of transparency. And there are several ways to achieve this. For example, we publish our community guidelines, or in the case of research, how our reviewers assess the quality of research, we publish them publicly. He added, “I think it’s important to do it in a way that spammers and others trying to circumvent your products aren’t able to as well. »
Regarding Musk’s plans for Twitter, he said, “I’m an avid Twitter user. I think it’s an extraordinarily important product for the world. I got a lot out of it. And I think there’s value in investing in it for the long term… I think it’s important because it plays an important role in democratic society… I would like the product to continue to improve. »