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Google is saving over $1bn a year by working from home

Savings offset many of the costs that came with hiring thousands more workers.
Colourful chairs in front of a building on the Google campus in Mountain View, California, US, on Wednesday, Oct. 21, 2020. Image: Bloomberg

With Covid-19 restrictions lifting, more people are booking trips and hotels online, which is very good for Google’s advertising business. Google’s employees, however, are working from home and not traveling as much on the company dime — and that’s also good for its business.

During the first quarter, Google parent Alphabet Inc. saved $268 million in expenses from company promotions, travel and entertainment, compared to same period a year earlier, “primarily as a result of Covid-19,” according to a company filing.

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On an annualised basis, that would be more than $1 billion. Indeed, Alphabet said in its annual report earlier this year that advertising and promotional expenses dropped by $1.4 billion in 2020 as the company reduced spending, paused or rescheduled campaigns, and changed some events to digital-only formats due to the pandemic. Travel and entertainment expenses fell by $371 million.

The savings offset many of the costs that came with hiring thousands more workers. And the pandemic prudence allowed the company to keep its marketing and administrative costs effectively flat for the first quarter, despite boosting revenue by 34%.

Google is notorious for perks such as massage tables, catered cuisine and corporate retreats, which have influenced much of Silicon Valley work culture. Most Google staff have worked remotely and without those perks since March of 2020.

However, Google plans to return to the office later this year. Chief financial officer Ruth Porat told investors the company is planning a “hybrid” model, spacing staff less densely than before. Porat also said Google will continue to invest in its real estate across the globe.

© 2021 Bloomberg

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Pandemic prudence has been one of the latent upsides of COVID-19. Who would have thought that we could achieve so much with so much less. Airlines, hotels and car hire companies have a new existential business risk to mitigate: The online home-office.

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