Google parent Alphabet (GOOGL -1.60%) (GOOG -1.65%) has been clobbered this year. After another round of punishment following the third-quarter 2022 update, shares are now down 38% this year with just two months left to go until the new year.  

The latest blame can be levied against a big slowdown in digital ad revenue at Google. Why? Some advertising buyers -- specifically, cryptocurrency businesses -- are reining in their promotional budgets.

Google blames crypto for its slowdown

Google's advertising engine started to stall in the second quarter of 2022, and that trend continued in Q3. Google ad revenue was up only 2.5% from a year ago (it increased 11.6% in Q2). Numerous reasons were given for the slump, but Google Chief Business Officer Philipp Schindler offered this explanation on the earnings call:

In Search and Other, the largest factor in the deceleration in Q3 was lapping the outsized performance in 2021. In the third quarter, we did see a pullback in spend by some advertisers in certain areas in Search ads. For example, in Financial Services, we saw a pullback in the insurance, loan, mortgage and crypto subcategories.

When economic uncertainty rises -- as it has this year amid high inflation, rising interest rates, and a war in Ukraine -- banking and financial services' profit margins can be an early casualty. In response, advertising activity is often cut to sustain the flow of cash into these highly sensitive companies. This time a year ago, though, all was well. Money was cheap (the Fed's interest rates were still close to 0%), inflation was still being preached as "transitory," and consumer spending was sky-high fueled by government pandemic aid. Crypto and financial services companies were more than willing to shell out big bucks for ads.

All that has changed now. Because of tougher economic factors, the cryptocurrency industry in particular has been beaten up. Crypto prices are in the dumps -- Bitcoin (BTC -3.22%) and Ethereum (ETH -3.83%) prices are still down by more than 50% so far in 2022. Crypto trading activity, among both consumers and institutional traders, has taken a step back, as reported by crypto platform companies like Coinbase (COIN -5.46%) and Silvergate Capital (SI 15.46%). And a handful of crypto companies and investment funds have gone bankrupt.

How long will the crypto slowdown last for Google? Chief Financial Officer Ruth Porat said on the earnings call that "in the fourth quarter, the very strong revenue performance last year will continue to create tough comps that will weigh on the year-on-year growth rate of advertising revenues."

I'm going to guess crypto ads will be a headwind into Q1 2023 as well. Remember all those Super Bowl ads last year, complete with celebrity cameos, implied endorsements, and a Coinbase QR code floating on the TV screen? That was in Q1 2022. Don't expect a repeat of that at the big game in a few months. 

Not just crypto headwinds, but fiat headwinds, too

I for one am happy to no longer see Larry David, Tom Brady, and Matt Damon pumping digital coin trading. But let's not make crypto the lone scapegoat here, because Google isn't. In fact, it's still making bets on blockchain technology, like Google Cloud's selection of Coinbase to power some of its Web3 development.

The biggest headwind to close out 2022 won't be cryptocurrency at all. It will actually be fiat currency -- specifically, the U.S. dollar's powerful run-up. That is creating a huge drag on international growth as Alphabet converts sales in other currencies back into stronger dollars. This effect reduced Alphabet's revenue growth from 11% to 6% in Q3. Currency exchange rates will be even more pronounced in Q4, Porat said, thanks to the Fed still hiking rates in an attempt to beat inflation.

A strong dollar might be the nail in the coffin for Google's growth for a bit longer. Nevertheless, Alphabet's Google empire can still grow over time even with lower crypto ads. And as economic clouds begin to clear, Google's crypto ad partners will likely begin to show signs of life again. Hold tight for a couple more quarters.