ominous sign for the online advertising market

A YouTube logo at YouTube Space LA in Playa Del Rey, Los Angeles, California, U.S. October 21, 2015.

Lucy Nicholson | Reuters

The online advertising market continues to suffer as a heavyweight alphabet and Microsoft reported disappointing sales during its final quarters on Wednesday.

YouTube’s ad revenue fell 2% year over year to $7.07 billion in Alphabet’s third quarter, missing analyst estimates of $7.42 billion. It was the first time YouTube’s advertising revenue has shrunk year over year since the company began reporting the division’s results in earnings reports in 2019.

Alphabet’s overall revenue growth fell sharply from 41% a year ago to 6% last quarter, underscoring how fears of a looming recession have prompted companies to scale back their advertising and marketing campaigns. Alphabet’s chief financial officer, Ruth Porat, said during a call with analysts that YouTube’s revenue decline “primarily reflects further declines in advertiser spend.”

Some of the advertisers who have slowed their online ad spend with Alphabet come from the financial services, insurance, credit and mortgage, and crypto industries, said Philipp Schindler, Alphabet’s chief business officer.

Last week, Snap set the tone for the online advertising market when it missed analyst estimates for its third-quarter revenue of $1.13 billion and sent its shares down more than 30% the next day. Snap attributed its poor sales to businesses reducing their “marketing budgets” in response to the poor economy, the company said in a letter to investors.

Microsoft also reported a slowdown in its online advertising business on Wednesday.

The search and news advertising business (which includes Bing and Microsoft News) posted revenue growth of 16% in the September quarter (Q1 of fiscal 2023), well below the 40% revenue growth reported in the same quarter a year ago. Additionally, LinkedIn’s revenue growth shrank to 17% in Microsoft’s fiscal first quarter, compared to 42% in the same quarter of 2021.

In fact, the growth rate of this business has shrunk every quarter over the past year, coinciding with the general downward trend of the overall online advertising marketing.

In the meantime, Meta is expected to report the second straight quarter of declining sales on Wednesday, underscoring the current turmoil in online advertising. Judging by recent earnings reports from various tech giants, Meta is unlikely to report any signs that the online advertising market is set for a recovery.

Alphabet misses out on both revenue and earnings per share, slight upside at Google Cloud


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