Daily Management Review

Revenues Of Big Tech Disclose The Digital Advertising Market Not Yet Out Of The Doldrums


Revenues Of Big Tech Disclose The Digital Advertising Market Not Yet Out Of The Doldrums
After a difficult 2022 in which advertising-dependent companies faced shrinking budgets and plummeting stock prices, fourth-quarter results from Alphabet, Meta Platforms, and Snap revealed that they were not yet out of the woods.
The health of the advertising industry closely mirrors the health of the economy, and many advertisers have reduced their marketing budgets in response to record-high inflation rates and ongoing concerns about a recession.
Alphabet Inc, the parent company of Google, reported a slight drop in quarterly ad revenue on Thursday, missing Wall Street expectations and surprising investors given that the world's largest digital ad platform has historically been resilient in comparison to smaller rivals. Alphabet shares were down 5% in after-hours trading after the bell.
"For a company the size of Google and as influential as Google to have such disappointing results, (that means the ad industry) won't turn around in one quarter," said Evelyn Mitchell, an analyst at Insider Intelligence.
Snap Inc, the parent company of the photo messaging app Snapchat, said Tuesday that it expects current-quarter revenue to fall by up to 10% due to ad dollar competition and a challenging economy.
"(Advertisers) are managing their spend very cautiously so they can react quickly to any changes in the environment," Snap Chief Executive Evan Spiegel said during an earnings call.
The second-largest digital ad platform, Meta Platforms Inc, lifted Wall Street on Wednesday with cost cuts and a large share buyback, despite reporting its third consecutive quarter of year-over-year revenue decline.
Lower ad spending from financial services and technology brands was one reason for the revenue decline, according to the company.
According to Meta Chief Financial Officer Susan Li, the broader economy remains "pretty volatile," and it is too early to predict how the year will unfold.
According to Nicola Mendelsohn, Meta's vice president of global business group, the mood among advertisers is one of "cautious optimism" for the coming year.
Advertisers in the United States have been bullish about the market, while sentiment in Europe has struggled, and China has shown signs of improvement, though the future remains uncertain amid the country's reopening, according to Mendelsohn.