What do Google, Snapchat, TikTok and Facebook all have in common? Business models that rely on selling ads. Because of that, they share something else: a problem.
Lately, ad spending is not what it used to be. But the slowdown is not hitting all tech platforms equally.
“There is a pretty unprecedented number of problems that are affecting advertising-based companies right now,” said Jasmine Enberg, a principal analyst at Insider Intelligence.
One big problem? Inflation.
“Corporations, the ones that spend money on marketing campaigns, are seeing cost inflation in a variety of other parts of their business,” said Mark Mahaney, a senior managing director at Evercore ISI. “So at the margin, that probably means they have less money to spend on marketing.”
So it’s no surprise then that ad-based companies’ earnings have slowed down — but they’ve not slowed down equally. Alphabet’s earnings were better than expected, Twitter’s were disappointing and SNAP’s were dismal.
“No advertising revenue platform is recession-proof, but not all ad platforms are created equal, and some are gonna be more recession-resistant,” Mahaney said.
We hear and talk about Snapchat and Twitter a lot, but in terms of ad revenue, they’re tiny; sometimes, they’re even considered experimental advertising. Google and Meta are huge.
“We are expecting Snapchat and Twitter each to make up under 1% of total worldwide digital ad revenues this year,” said Insider Intelligence’s Enberg. “Compare that with Google, which is up close to 30%.”
So, it’s the little guys that are getting get stung worse here. But ad revenue slowing down is different from declining.
“Overall in the industry, we don’t see a decline in store,” said Kate Scott-Dawkins with media investment company GroupM.
Some companies may lose ground, others may gain: TikTok’s growth has been explosive, for example. But overall, Scott-Dawkins said ad revenue growth for the industry will be in the low double digits — not terrible, just not the 50% to 60% growth some companies saw last year.
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