Digital advertising giants Google, Facebook and Amazon descend from pandemic heights

The supercharged ad growth that some of the world’s biggest tech companies have reported during the pandemic has slowed.

A series of tech results last week made it clear that the wave of digital advertising caused by covid has begun to subside. The slowdown was reinforced by a confluence of events including inflation fears, supply chain shortages, the war in Ukraine, a gradual return to normal two years into the pandemic, the rise continue from TikTok and

recent privacy changes.

“We haven’t seen a collective set of headwinds for advertisers like this since the early 1980s,” said

Michael Nathanson,

analyst at MoffettNathanson.

The three largest players in digital advertising in the United States – the parent company of Google

Alphabet Inc.

GOOG -4.76%

parents facebook

Meta-platforms Inc.

Facebook -6.77%

and

Amazon.co.uk Inc.

AMZN -7.56%

Last week, advertising revenue in the first three months of 2022 rose 22%, 6.1% and 23%, respectively, from a year earlier, down sharply from increases of more than 50 % they experienced at some point in the last year. Facebook’s overall revenue growth was the slowest on record since its IPO in 2012.

“Digital is holding its gains, but not growing as fast as it is doing during the pandemic. »

brand read,

the CEO of the world’s largest advertising holding company,

WPP

PLC, said in an interview last week.

The Big Three’s rapid growth during the pandemic has further cemented their dominance of the advertising market. The year 2020 marked the first time that Google, Facebook and

Amazon

AMZN -7.56%

has reason the majority of all advertising spending in the United States.

Representatives from Google, Meta and Amazon had no comment.

In the early days of the pandemic, consumers were spending more time on computer screens and making more purchases online, but their behaviors were in more normal patterns as Covid-19 fears fade.

“After the onset of Covid, the acceleration of e-commerce led to outsized revenue growth, but now we see that trend fading,” said Meta CEO

Mark Zuckerberg

during a call with analysts last week to discuss first-quarter results.

Global digital ad spending is expected to rise 13% this year, excluding political ad dollars, a significant slowdown from the 30% tie it made last year, according to unit WPP GroupM, l one of the largest ad buyers in the world. Digital advertising is growing much faster than advertising on other platforms, from TV to newspapers, and is expected to account for 67% of total global ad spend this year, GroupM said.

“Once you’re two-thirds of the industry, it’s really hard to grow,” said

Brian Wieser,

GroupM’s Global President of Business Intelligence.

Both Meta and Alphabet cited the war in Ukraine as one of the contributing factors to the revenue slowdown. War had ‘outsized impact on YouTube ads compared to rest of Google’, Alphabet CFO

Ruth Porat

during the company’s earnings conference call last week. The company said it saw a related reduction in spending primarily from brand advertisers in Europe. Meta said the war led to a reduction in advertising demand, both in Europe and outside the region.

On Wednesday, Meta announced a sharp slowdown in hiring.

The slowing growth comes at a particularly vulnerable time for the digital advertising industry, which is trying to cope with the mobile ad tracking changes that Apple introduced last year and are making it more difficult for advertisers to target consumers and measure the effectiveness of their ads.

The shift has driven the digital advertising model and continues to be a pain point, leading many small businesses and e-commerce businesses to diversify their spend across more players. Last quarter, Meta warned that the changes would cost the company some $10 billion in 2022.

TikTok, the app best known for its viral short videos, is expected to see its global ad revenue triple this year.

Photo:
MIKE BLAKE/REUTERS

Digital ad players are also facing increased competition from TikTok, the hugely popular app best known for its viral short videos owned by Chinese company ByteDance Ltd.

TikTok’s global ad revenue was expected to triple this year to $11.6 billion, helping it outpace the combined sales of its rivals.

To babble Inc.

and

To break Inc.

according to Insider Intelligence. The research firm expects Twitter and Snapchat to generate $5.58 billion and $4.86 billion in ad revenue, respectively, this year.

Google and Meta are racing to increase their TikTok-like offerings. Both companies talked about their fledgling short video services — Shorts and Reels — during their first-quarter calls with analysts.

Twitter and its $4.5 billion advertising business could be vulnerable in the wake of

Elon MuskEast

$44 billion pending takeover from the San Francisco-based company, ad buyers said. Some brands could drop the service if Mr. Musk’s efforts to make Twitter an open platform lead to an increase in the amount of misinformation and other controversial content, ad buyers said.

Twitter has reached out to some advertisers to reassure them that the company is committed to protecting the brand, according to an email seen by The Wall Street Journal. The email was previously reported by the Financial Times.

A representative for Twitter had no further comment.

write to Suzanne Vranica at [email protected]

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