Advertising revenue of industry giants such as Alphabet (Google's parent company) or Microsoft all gave poor results and dropped sharply over the same period.
According to CNBC , the online advertising market continues to be hit hard when two big players in the industry, Alphabet Inc. - parent companies Google and Microsoft reported disappointing revenue for the most recent quarter.
Specifically, in Alphabet's financial report for the third quarter of 2022, YouTube ad revenue fell 2% year-on-year to $7.07 billion, compared with analyst estimates of 7, 42 billion USD .
This is also the first time that YouTube's ad revenue has decreased year-on-year since the company began publishing separate business results in 2019.
Alphabet's overall revenue growth plummeted from 41% a year ago to just 6%, underscoring fears of a looming recession forcing companies to cut many advertising and marketing campaigns. .
Big man in trouble
Alphabet's chief financial officer Ruth Porat also acknowledged the uncertainty of a number of economic factors as a major challenge and "primarily reflects a decline in advertiser spending."
Meanwhile, Google's chief business officer, Philipp Schindler, said that the company is seeing businesses cutting back on spending on search engine ads in areas like insurance, debt, and crypto. chemical
Just last week, Snap gave the first sign of a downturn in the online advertising market when it posted results, indicating it was the company's worst quarter as revenue growth slowed, sending shares plunging. more than 30% off the next day.
According to the letter to investors, Snap attributed the poor sales to the fact that companies were "cutting their marketing budgets" in response to the weak economy.
Another big player in the industry, Microsoft, also showed a slowdown in the online advertising business with its latest quarterly report.
Accordingly, the search and news advertising business, which includes the Bing engine and Microsoft News, posted a growth of only 16%, much lower than the same period last year of 40%.
The growth rate of the advertising business continued to shrink quarterly over the past year, coinciding with the overall downward trajectory of the entire online advertising market.
Additionally, quarterly sales growth on Microsoft's work social network LinkedIn slowed to 17% from 42% in the same period in 2021.
"The decline in customer ad spend, which typically wanes towards the end of the quarter, has impacted search in LinkedIn's advertising and marketing solutions," Microsoft Chief Financial Officer Amy Hood told Business Insider. analysts.
Facebook's parent company Meta is expected to report a second straight quarter of declining sales, underscoring the current turmoil in the online advertising industry. Judging from recent reports from various tech giants, CNBC says there is no chance for Meta to show signs of recovery.
Spotify, the music streaming platform with the US as the largest market is also not immune to crisis. The company said on October 25 that the "challenging" economic environment affected the company's ad sales in the third quarter of 2022, contributing to massive losses despite its user expansion. still growing steadily.
The weak revenue growth results are the latest sign of a slowdown in the online advertising industry in particular and the world's largest economy in general, as consumers and businesses tighten spending at this time. inflation rate increased.
The specter of inflation
The marketing budget is often the first place that companies think of when trying to cut costs. According to analysis by the Financial Times , the measure of consumer confidence has now fallen to its lowest level in more than a year. The Situation Index released by the Conference Board fell to 138.9, the weakest level since April 2021.
Lynn Franco, senior director at the Conference Board, said the sharp drop indicated economic growth had slowed at the start of the fourth quarter of 2022 and described consumer expectations as "very dismal".
The global economy has wobbled in recent months as central banks repeatedly raised interest rates to combat the highest inflation rates in more than 40 years. This strategy is threatening to push the economy into recession.
according to the AP . Many households have tightened their budgets and cut back on unnecessary items, leading advertisers to spend less to market their products and services,
Also in the financial report, Google CEO Sundar Pichai said it will cut operating costs in the face of a downturn in the economy, inflation, high interest rates and businesses reducing advertising spending. The company will reduce recruiting new employees in the fourth quarter to adjust the group's spending sources.
In addition to the economic downturn causing users to tighten their spending, the cause of the decline across the industry can be attributed to competition for advertising costs from other social networks, along with the trend of favoring TikTok. than users' YouTube, according to Bloomberg .
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