The online advertising market is in decline and tech giants are dragging with it

“It looks like we’ve entered a recession that will have a broad impact on the digital advertising business,” Mark Zuckerberg, CEO of Meta, told analysts at the company’s start. Earnings call on wednesday. “It’s always hard to predict how deep or how long these cycles will go, but I’d say the situation looks worse than it did a quarter ago.”
dead (FB)And the Twitter (TWTR)And the Explode, Explode (Explode, Explode)And the The Google (The Google)And the apple (AAPL) And the Microsoft (MSFT) Everyone reported that shrinking advertising budgets – a result of the recent market downturn and economic uncertainty – had a negative impact on their earnings in the previous quarter and is likely to continue to be a challenge in the coming quarters. spotify (spot) She also said that she had seen a “regression” in her advertising activity, which began in the last two weeks of June.
Even those with dominant positions in the market were not immune. google core Advertising business has grown Only 11.6% year over year, compared to the nearly 69% increase it recorded over the same period last year. Parent company, Meta, Facebook and Instagram, announced the first quarterly revenue decline in its history as a public company. (Ads make up the vast majority of Meta’s revenue.)
Those who rely a lot on advertisements also felt annoyed. Microsoft He said it took Revenue was $100 million during the second quarter from lower advertising spend. “Digital advertising was clearly affected by the macroeconomic environment during the June quarter,” Apple CEO Tim Cook told analysts Thursday, affecting revenue from its services.

Meta shares are down about 7% since the beginning of this week as of Friday morning. Snap shares fell more than 25% after it reported earnings last week.

“Today’s results largely reflect the impact of a challenging economic environment that is hurting nearly every tech giant,” Harris Anwar, chief analyst at Investing.com, said in a statement.

It is a stark reflection of the online advertising industry. After a brief downturn at the start of the pandemic, advertisers began funneling money into online advertising to reach consumers who spent more time plugging in screens. This time last year, both Meta and Snap reported that quarterly sales had doubled from the previous year, and Google had grown 62%.

But the world is a very different place now. Russia’s months-long war in Ukraine has caused some uncertainty among advertisers and many tech companies Reply to the attack By cutting off the ability of Russia-based companies to advertise on their platforms.

Recently, rising inflation, a slumping market and fears of a recession have prompted companies to roll back their advertising budgets, the tech giants said during their earnings reports this week. Several companies, including in the tech industry, have recently slowed hiring and investment amid economic uncertainty.

The nature of how certain online advertising campaigns are run made the pain immediate. Snap’s chief financial officer Derek Anderson noted on the company’s earnings call last week that “advertising spending – particularly auction-driven direct response advertising – is among the very few elements in the company’s cost structure that can be reduced immediately in response to pressure” on other parts of the company. their business.

Google reports a significant slowdown in ad sales growth in the wake of the pandemic boom

These macroeconomic challenges are expected to continue into the rest of this year. Meta said Wednesday that it expects revenue for the current quarter to be between $26 billion and $28.5 billion, which is a second decline in quarterly revenue year over year. Although Snap declined to provide financial guidance due to the volatile environment, it said third-quarter revenue has been flat so far compared to a year earlier.

The downturn also comes after Apple Application tracking changes, which came into effect in the second half of last year, has already affected some of the tech giants. Apple has introduced a feature that allows users to opt out of some tracking by apps, which removes some important data that social media platforms use to target ads. The change hurt the advertising companies of Meta, Twitter, and Snap, as well as smaller players like Pinterest. Meta ad revenue alone received $10 billion from a privacy update last year, and Snap’s Anderson said last week that the changes “upended a decade of advertising industry standards.”

And while Google makes use of its third-party data, YouTube ad activity hasn’t quite delivered.

“It’s now basically a perfect storm for digital advertising,” said Tom Forte, analyst at DA Davidson. For companies that rely on advertising, “there are significant risks to your earnings.”

CNN’s Rishi Iyengar contributed to this report.

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