A new video from Inspired by Iceland argues for experiencing life through the “metaverse,” as described by Mark Zuckerberg during Facebook’s rebranding to Meta on Thursday, October 28, 2021.
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Wall Street is preparing for disaster in online advertising.
After disappointing results from Snap last week and a 28% drop in its share price that took the company’s value to its lowest level since the start of 2019, investors are now turning their attention to the advertising giants Meta AND Alphabet as well as this week’s reports from I tweet AND Pinterest. They will also hear from Amazon AND Microsoftwhich have their own large advertising businesses.
The flurry of reports comes at a time of extreme skepticism in web and mobile advertising. Meta’s Facebook shares are down more than 60% this year, and the company is expected to report a second straight decline in revenue. Alphabet, which is down 30% in 2022, is expected to report single-digit sales growth. Barring a quarter at the start of the pandemic, that would mark the Google parent’s weakest period since 2013.
The economic downturn and fears of a recession have caused many retailers to hold back on spending. In the same time, of Apple The iOS privacy change from last year continues to penalize companies — notably Snap and Facebook — that have historically relied on user data to target ads.
“Sentiment in the online ad space has softened recently, with more anecdotes of budget cuts as well as advertisers holding back some budget in anticipation of a 4Q influx,” UBS analysts wrote in a report last week. “Looking ahead to ’23, we think planning amid this level of macro uncertainty sets the stage for a below-consensus upside in ’23, even if macro doesn’t deteriorate significantly from here.”
UBS said it would “reduce estimates and price targets across the online ad group” due to the economic environment and a strong US dollar. Through discussions with digital ad agencies, the analysts said they learned that “many ad directors are pulling back on certain budgets, especially among smaller advertisers.”
In Snap’s report Thursday, the company said results are being hit by a combination of platform changes, economic challenges and competition. For the second quarter in a row, Snap said it would not provide guidance for the next period because of the difficulty in predicting the economic trajectory.
Digital advertising shares in 2022
CNBC
“We are finding that our advertising partners in many industries are reducing their marketing budgets, particularly in the face of operating environment headwinds, inflation-driven cost pressures and rising capital costs,” Snap said.
If the third quarter mirrors the second, Snap’s brutal report could spell dismal results for its industry peers. In July, Meta, I tweet, Pinterestand Google all reported weaker-than-expected results after Snap’s loss.
Investors began planning ahead last week, sending Pinterest shares down more than 6% on Friday after Snap’s report. Twitter fell almost 5% and Meta fell more than 1%. Alphabet rose more than 1%, but still underperformed the tech-heavy Nasdaq, which jumped 2.3%.
CNBC’s Jim Cramer and the Investment Club said there’s a chance Snap’s poor results don’t reflect the overall online ad market. Meta and Alphabet “have built multifaceted digital ecosystems” that dwarf the smaller Snap, making these companies “more immune to weaker digital ad spending,” Investing Club wrote.
Industry drama this week isn’t limited to earnings reports.
Tesla CEO Elon Musk has until Friday to close his proposed $44 billion acquisition of Twitter if he wants to avoid a trial. After changing his mind about the deal several times and being sued, Musk said earlier this month that he wanted to complete the transaction at the originally agreed upon price of $54.20 per share. Twitter wants to make sure funding is in place before dropping the lawsuit.
Twitter shares closed last week below $50, suggesting investors still aren’t convinced the deal will close. Meanwhile, business has struggled. Analysts are predicting a decline in third-quarter revenue in the company’s earnings report, which is expected this week.
A bright spot in the online advertising space could be Amazon as its digital advertising business grew 18% in the second quarter, leading all major players in the industry.
While retailers may shy away from spending on Facebook and elsewhere, Amazon is a stickier platform for them because the people who use it are buying things. For companies to keep their brands visible on the largest e-commerce site, they must pay the platform.
But Amazon’s core business has also suffered this year, with growth slowing dramatically from its heyday during the pandemic. Overall revenue expansion was in the single digits for three consecutive quarters, and the stock is down 28% for the year.
By the time Amazon wraps up Big Tech’s earnings week on Thursday, investors should have a much clearer picture of the online advertising market and how much companies are tightening their belts heading into the holiday season.
friend: Snap has been a victim of budgets being passed on to TikTok
