TIMES.KY

Cayman Islands, Caribbeanand International News
Saturday, Jun 03, 2023

The online ad market is in decline and it's dragging down tech giants with it

The online ad market is in decline and it's dragging down tech giants with it

Much of contemporary Silicon Valley was built on advertising dollars. That dependence made even the most powerful companies look at least somewhat vulnerable this week after reporting their latest earnings results.
"We seem to have entered an economic downturn that will have a broad impact on the digital advertising business," Meta CEO Mark Zuckerberg told analysts at the start of the company's earnings call on Wednesday. "It's always hard to predict how deep or how long these cycles will be, but I'd say that the situation seems worse than it did a quarter ago."

Meta (FB), Twitter (TWTR), Snap (SNAP), Google (GOOGL), Apple (AAPL) and Microsoft (MSFT) all reported that shrinking advertising budgets — a result of the recent market downturn and economic uncertainty — took some toll on their previous quarter earnings and would likely continue to be a challenge in the coming quarters. Spotify (SPOT) also said it saw "softening" in its ad business starting in the last two weeks of June.

Even those with dominant market positions weren't immune. Google's core advertising business grew just 11.6% year-over-year, compared to the nearly 69% increase it posted during the same period last year. Meta, Facebook and Instagram's parent company, posted its first year-over-year quarterly revenue decline in its history as a public company. (Advertising accounts for the vast majority of Meta's revenue.)

Those much less dependent on advertising felt the pinch as well. Microsoft said it took a revenue hit of $100 million during the second quarter from a reduction in advertising spend. Apple CEO Tim Cook told analysts Thursday that "digital advertising was clearly impacted by the macroeconomic environment during the June quarter," weighing on its services revenue.

Shares of Meta were down around 7% from the start of this week as of Friday morning. Snap shares fell more than 25% after it reported earnings last week.

"Today's results are very much reflecting the impact of a challenging economic environment which is hurting almost every mega tech company," Haris Anwar, a senior analyst at Investing.com, said in a statement.

It's a stark reversal for the online advertising industry. After a brief dip at the start of the pandemic, advertisers began funneling money into online ads to reach consumers who were spending more time plugged into screens. This time last year, Meta and Snap both reported that quarterly sales had doubled from the prior year, and Google's grew by 62%.

But the world is a very different place now. Russia's monthslong war in Ukraine caused some uncertainty among advertisers, and many tech companies responded to the attack by cutting off the ability for Russian-based companies to advertise on their platforms.

More recently, a surge inflation, a market downturn and fears of a recession have prompted companies to pull back on their ad budgets, tech giants said during their earnings reports this week. Many companies, including in the tech industry, have recently slowed hiring and investments amid the economic uncertainty.

The very nature of how some online ad campaigns are run has made the pain immediate. Snap CFO Derek Anderson noted in the company's earnings call last week that "advertising spending — in particular auction-driven direct response advertising — is among the very few line items in a company's cost structure that they can reduce immediately in response to pressure" on other parts of their business.

Those macroeconomic challenges are expected to drag into the rest of this year. Meta said Wednesday it expects revenue for the current quarter to be between $26 billion and $28.5 billion, which would mark a second year-over-year quarterly revenue decline. Although Snap declined to provide financial guidance because of the uncertain environment, it said third quarter revenue was so far flat compared to the previous year.

The downturn also comes after Apple's app tracking changes, which went into effect in the second half of last year, had already been taking a toll on some tech giant's businesses. Apple introduced a feature that lets users opt out of some tracking by apps, taking away some crucial data that social media platforms use to target ads. The change hurt ad businesses at Meta, Twitter and Snap, as well as smaller players such as Pinterest. Meta's ad revenue alone took a $10 billion hit from the privacy update last year, and Snap's Anderson said last week that the changes "upended a decade of advertising industry standards."

And while Google has the benefit of its own third-party data, YouTube's ad business hasn't been entirely spared.

"Right now is essentially a perfect storm for digital advertising," D.A. Davidson analyst Tom Forte said. For companies reliant on advertising, "there's a high risk to your revenue."
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

TIMES.KY
Close
0:00
0:00
Nvidia Joins Tech Giants as First Chipmaker to Reach $1 Trillion Valuation
Drone Attack on Moscow's Wealthiest Neighborhoods Suspected to be Launched by Ukraine
Elon Musk Meets Chinese Finance Minister in Beijing
AI ‘extinction’ should be same priority as nuclear war – experts
Prominent Hacker Forum RaidForums Suffers Substantial Data Breach
Nvidia CEO Huang says firms, individuals without AI expertise will be left behind
WPP Revolutionizes Advertising with NVIDIA's AI Powerhouse
Two US Employees Fired For Chasing Robbers Out Of Store As They Broke ''Company Policy''
If you donated to BLM, you got played
Pfizer, the EU, and disappearing ink - Smoke, Mirrors, and the Billion-Dose Pfizer Vaccine Deal: EU's 'Open Secret
Actor Tom Hanks told Harvard University graduates to be superheroes in their defense of truth and American ideals, and to resist those who twist the truth for their own gain
The Sussexes' Royal Rebound: Could Harry and Meghan Markle Return to the UK?
A provocative study suggests: Left-Wing Extremism and its Unsettling Connection to Psychopathy and Narcissism
France Arrests 10 on Suspicion of Failing to Respond in Time to Migrant Drowning
Neuralink Receives FDA Approval for First-in-Human Clinical Study
Is Saudi Arabia the holiest place in the world? Ancient Hebrew Inscriptions from "The Mount Sinai Stand" Discovered in Saudi Arabia
Ukrainian Intelligence Official Admits to Assassination Attempts on Putin
Bernard Arnault Loses $11.2 Billion in One Day as Investors Fear Slowdown in US Growth Will Reduce Demand for Luxury Products
Russian’s Wagner Group leader: “I am not a chef, I am a butcher. Russia is in danger of a revolution like in 1917.”
TikTok Sues Montana Over Law Banning the App
Ron DeSantis Jumps Into 2024 Presidential Race, Setting Up Showdown With Trump
Last Walmart in North Portland Closing Down
Florida's DeSantis seeks to disqualify judge in Disney case
Talks between US House Republicans and President Biden's Democratic administration on raising the federal government's $31.4tn debt ceiling have paused
Biden Administration Eyeing High-Profile Visits to China: The Biden Administration is heating things up by looking into setting up a series of top-level visits to Beijing by top officials in the coming months
New evidence in special counsel probe may undercut Trump’s claim documents he took were automatically declassified
A French court of appeals confirmed former President Nicolas Sarkozy's three-year jail term for corruption and influence peddling
Debt Ceiling Crises Have Unleashed Political Chaos
Weibao Wang, a former software engineer at Apple, was charged with stealing trade secrets related to autonomous systems, including self-driving cars
Mobile phone giant Vodafone to cut 11,000 jobs globally over three years as new boss says its performance not good enough
Elon Musk compares George Soros to Magneto, the supervillain from the Marvel Comics series.
Warren Buffett Sells TSMC Shares Over Concerns About Taiwan's Stability
New Study Finds That Secondary Bacterial Pneumonia Is a Major Cause of Death in COVID-19 Patients Who Require Ventilator Assistance
The Prime Minister of St. Vincent and the Grenadines calls the British monarchy "an absurdity" he wants to remove in his lifetime
King Charles III being crowned.
'Godfather Of AI' Geoffrey Hinton Quits Google To Warn Of The Tech's Dangers
A Real woman
Vermont Man Charged with Stalking After Secretly Tracking Woman with Apple AirTag
Elon Musk Statements About Tesla Autopilot Could Be 'Deepfakes,' Lawyers Claim. Judge Evette Pennypacker Does Not Understand How Far and Advanced This Technology Became
Ukraine More Prepared for Counterattack as Reinforcements Arrive
UK Prime Minister Rishi Sunak and Italian Prime Minister Giorgia Meloni Discuss Migration, Defence, and Ukraine
AT&T's Successful Test of Satellite-Based Phone Call Raises Possibility of Widespread Coverage
CNN: "Joe Biden is asking for four more years — when 74% of Americans think the country is heading the wrong way“
Turkish President Recep Tayyip Erdogan Cuts Short Live TV Interview Due to Health Issue
US Congresswoman threaten Twitter Files journalist with arrest
Pulitzer Prize-winning journalist Seymour Hersh slams New York Times' pro-government stance and treatment of sources
Enough is enough: it's time to end the war in Ukraine. While Russia may be to blame for starting it, Russia is not the one refusing to stop it
Fox News Settles their case with Dominion Voting Systems for a staggering $787.5 MILLION
AG decries scapegoating and rushed lawmaking by government
The land of the free violence
×