Media platforms

Global ad spend slowdown is real as online media platforms brace for slowdown

[ad_1]

The global advertising slowdown is real. So real in fact that even the usually recession-proof online platforms are feeling the crunch.

The slowdown ravaged ad sales on YouTube, Snapchat, Twitter and Facebook in the last quarter. This will probably continue for the rest of the year. Inflation is not easing anytime soon, nor are the lingering effects of the pandemic. Not to mention a war in Ukraine that continues to affect every industry, including advertising.

Then there are the side effects of the semiconductor shortage that continues to weigh on some of the biggest advertisers, as well as the ubiquitous decline in consumer spending. Add to that the fact that macro issues are taking a while to trickle down to advertising, and also the loss of third-party addressability and how that continues to throttle the flow of media dollars to some platforms more than others.

All in all, a turbulent 2022 could get even worse for some of the media industry‘s most valuable companies.

Here are the key numbers that show the precarious state of online ad spending today:

  • YouTube earned $7.4 billion in ad revenue in the second quarter, up 4.8% from a year earlier. This is the slowest pace since Alphabet began disclosing this data in 2019.
  • The quarterly of Meta, owner of Facebook revenue (the bulk of which comes from advertising) was $28.2 billion, down 1% from the same period a year ago. This is the company’s first drop in revenue in a decade.
  • Snap’s revenue for the second quarter was $1.1 billion. That’s 13% higher than the year-ago quarter, but it’s also below analysts’ expectations. Advertisers are cutting ad spend on the app more than expected — a slump the company has attributed to high economic uncertainty.
  • Twitter’s ad revenue slowed in the quarter to $1.08 billion — a 2% year-over-year gain — as the platform grappled with economic challenges and a battle lawsuit with billionaire Elon Musk, who offered $44 billion to buy the company before trying to back out of the deal.

The forecasts for the rest of the year from these companies were equally offhand. Here are the main sound bites from their earnings calls:

  • Ruth Porat, Alphabet’s Chief Financial Officer, said: “At YouTube and Network, declines in spending by some advertisers in the second quarter reflect uncertainty around a number of factors that are difficult to disaggregate. Within other revenue in the third quarter , we expect a continued headwind from fee changes and slowing buyer spending that impacted second quarter results.
  • Dave Wehner, Meta’s Chief Financial Officer, said, “Ad revenue growth slowed throughout the second quarter as advertiser demand declined. The deceleration was broad-based across all verticals, and we believe companies are cutting advertising spend in response to heightened economic uncertainty. Foreign currency headwinds also increased throughout the second quarter.
  • Derek Andersen, CFO of Snapchat, said, “We’re seeing these various headwinds putting pressure on earnings for a wide variety of businesses, and that’s having a direct impact on advertising demand. Specifically, advertising spend, especially auction-driven direct-response advertising, is one of the very few elements of a company’s cost structure that it can immediately reduce in response to revenue pressure. business or its entry costs.

So why is ad spend slowing across platforms? We took a closer look.

A two-way online advertising economy

It appears a two-way online ad economy has emerged over the past quarter, with advertisers bolstering search ad spend as a core part of their media strategies while reducing other areas such as display. online and social media. Google’s search revenue during the period increased 13% compared to the same period last year, reaching $40.7 billion. It’s a similar story at Microsoft, where Bing search ad revenue grew 15% in the quarter compared to the same year last year. Compare these gains to the slow growth and even declines posted by YouTube and other media platforms over a similar period. Search advertising continues to be the only refuge for many advertisers when the wind blows.

Slowdowns suck up trash like a vacuum cleaner

Consumer spending and business investment are still expected to be subdued for some time to come, leaving ruthless profitability as the only viable way to maintain margin. Or to put it another way, all eyes of business are on inefficiencies, including in The advertisement. This is a point that is not lost on Google. The day after Alphabet disclosed its second quarter results, Google unveiled a transparency tool called “Confirmation of gross incomein what can only be construed as a game to allay growing fears among advertisers that its automated “black box” platforms are not delivering the value promised and reversing the decline noted in the previous day’s disclosure.

In a blog post marking the launch, Allan Thygesen, President, Americas and Global Partners at Google, referenced a study by PricewaterhouseCoopers, which found that 15% of all automated ad spend is inexplicable. “One of my biggest concerns about this trend is its impact on marketers’ confidence in digital advertising,” he noted, saying this team wanted to provide greater visibility into these investments.

Certain of uncertainty

As for how ad spending will shake out the rest of the year, it’s hard to say.

“The rest of the year is on hold due to what’s happening in the macro environment that I wouldn’t draw causal conclusions from in the second quarter,” Aviran said. Eder, vice president at Verge Group. “We are heading into a traditionally stronger part of the advertising calendar. Q2 is not necessarily going to be a predictor of what’s going to happen in Q3, in Q4, for the rest of the year. There are so many fluid and changing things in the macro environment that I think each platform will have its own independent results.

Seb Joesph and Ronan Shields contributed reporting for this story.

[ad_2]
Source link