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After a difficult year in which advertising-dependent firms faced reduced budgets and plummeting stock values, fourth-quarter reports from Alphabet, Meta Platforms, and Snap revealed that they were not yet out of the woods.
The health of the advertising industry is closely tied to the health of the economy. As a result of record-high inflation rates and ongoing worries about a recession, many marketers have cut their spending on advertising.
Alphabet, the parent company of Google, announced a tiny drop in quarterly ad income on Thursday, missing Wall Street projections and surprising investors given that the world’s largest digital ad platform has historically proven robust 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, the company that owns the picture messaging app Snapchat, said on Tuesday that it expects revenue for the current quarter to drop by up to 10% because of competition for advertising dollars and a tough 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, buoyed Wall Street on Wednesday with cost savings and a massive share repurchase, despite reporting its third straight quarter of year-over-year revenue drops.
Lower ad spending from financial services and technology firms was one reason for the revenue reduction, according to the company.
According to Meta Chief Financial Officer Susan Li, the broader economy is “very turbulent,” 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 atmosphere among marketers is one of “cautious optimism” for the next year.
According to Mendelsohn, advertisers have been positive about the US market, but the mood in Europe has suffered, and China has shown indications of recovery, albeit the future remains unknown despite the country’s openness.