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After a challenging 2022 in which advertising-dependent companies faced shrinking budgets and falling stock prices, this week’s fourth-quarter results from Alphabet, Meta Platforms and Snap showed that they are not out of the red.
The health of the advertising industry closely mirrors the economy, and many advertisers have cut their marketing budgets in response to record high inflation rates and continued uncertainty about the recession.
Google owner Alphabet reported a slight drop in quarterly advertising revenue, which fell short of Wall Street expectations and surprised investors, as the world’s largest digital ad platform has traditionally been flexible compared to smaller rivals. Alphabet shares fell 5 percent in after-hours trading.
“For a company as big and influential as Google to have such disappointing results, (it means the ad industry) isn’t going to change direction in one quarter,” said Insider Intelligence analyst Evelyn Mitchell.
Snap, the owner of photo-messaging app Snapchat, said on Tuesday it expects revenue to drop as much as 10 percent in the first quarter of this year due to competition for advertising dollars and a challenging economy. “Advertisers are very careful with their spending to be able to respond quickly to any changes in the environment,” Snap CEO Evan Spiegel said during the earnings call.
Meta Platforms, the second-largest digital ad platform, excited Wall Street with its cost-cutting and large stock buyback, but reported its third consecutive quarter of year-over-year revenue declines. Lower advertising spending by brands operating in the financial services and technology sectors was among the reasons for the drop in revenue, the company said. Susan Li, chief financial officer at Meta, says the broader economy remains quite volatile and it’s too early to tell what this year will look like.
Advertisers are generally “cautiously optimistic” about the year ahead, Nicola Mendelsohn, vice president of Meta’s global business group, said in an interview on Thursday. According to regions, advertisers are optimistic about the American market, while in Europe the mood is relatively weaker, and in China there were signs of improvement, although the future remains uncertain amid the reopening of the country, Mendelsohn said in the According to Reuters.
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