Beautiful Virgin Islands

Sunday, May 11, 2025

The online ad market is in decline and it's dragging down tech giants with it

The online ad market is in decline and it's dragging down tech giants with it

Much of contemporary Silicon Valley was built on advertising dollars. That dependence made even the most powerful companies look at least somewhat vulnerable this week after reporting their latest earnings results.
"We seem to have entered an economic downturn that will have a broad impact on the digital advertising business," Meta CEO Mark Zuckerberg told analysts at the start of the company's earnings call on Wednesday. "It's always hard to predict how deep or how long these cycles will be, but I'd say that the situation seems worse than it did a quarter ago."

Meta (FB), Twitter (TWTR), Snap (SNAP), Google (GOOGL), Apple (AAPL) and Microsoft (MSFT) all reported that shrinking advertising budgets — a result of the recent market downturn and economic uncertainty — took some toll on their previous quarter earnings and would likely continue to be a challenge in the coming quarters. Spotify (SPOT) also said it saw "softening" in its ad business starting in the last two weeks of June.

Even those with dominant market positions weren't immune. Google's core advertising business grew just 11.6% year-over-year, compared to the nearly 69% increase it posted during the same period last year. Meta, Facebook and Instagram's parent company, posted its first year-over-year quarterly revenue decline in its history as a public company. (Advertising accounts for the vast majority of Meta's revenue.)

Those much less dependent on advertising felt the pinch as well. Microsoft said it took a revenue hit of $100 million during the second quarter from a reduction in advertising spend. Apple CEO Tim Cook told analysts Thursday that "digital advertising was clearly impacted by the macroeconomic environment during the June quarter," weighing on its services revenue.

Shares of Meta were down around 7% from the start of this week as of Friday morning. Snap shares fell more than 25% after it reported earnings last week.

"Today's results are very much reflecting the impact of a challenging economic environment which is hurting almost every mega tech company," Haris Anwar, a senior analyst at Investing.com, said in a statement.

It's a stark reversal for the online advertising industry. After a brief dip at the start of the pandemic, advertisers began funneling money into online ads to reach consumers who were spending more time plugged into screens. This time last year, Meta and Snap both reported that quarterly sales had doubled from the prior year, and Google's grew by 62%.

But the world is a very different place now. Russia's monthslong war in Ukraine caused some uncertainty among advertisers, and many tech companies responded to the attack by cutting off the ability for Russian-based companies to advertise on their platforms.

More recently, a surge inflation, a market downturn and fears of a recession have prompted companies to pull back on their ad budgets, tech giants said during their earnings reports this week. Many companies, including in the tech industry, have recently slowed hiring and investments amid the economic uncertainty.

The very nature of how some online ad campaigns are run has made the pain immediate. Snap CFO Derek Anderson noted in the company's earnings call last week that "advertising spending — in particular auction-driven direct response advertising — is among the very few line items in a company's cost structure that they can reduce immediately in response to pressure" on other parts of their business.

Those macroeconomic challenges are expected to drag into the rest of this year. Meta said Wednesday it expects revenue for the current quarter to be between $26 billion and $28.5 billion, which would mark a second year-over-year quarterly revenue decline. Although Snap declined to provide financial guidance because of the uncertain environment, it said third quarter revenue was so far flat compared to the previous year.

The downturn also comes after Apple's app tracking changes, which went into effect in the second half of last year, had already been taking a toll on some tech giant's businesses. Apple introduced a feature that lets users opt out of some tracking by apps, taking away some crucial data that social media platforms use to target ads. The change hurt ad businesses at Meta, Twitter and Snap, as well as smaller players such as Pinterest. Meta's ad revenue alone took a $10 billion hit from the privacy update last year, and Snap's Anderson said last week that the changes "upended a decade of advertising industry standards."

And while Google has the benefit of its own third-party data, YouTube's ad business hasn't been entirely spared.

"Right now is essentially a perfect storm for digital advertising," D.A. Davidson analyst Tom Forte said. For companies reliant on advertising, "there's a high risk to your revenue."
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Retired British police officer arrested over ‘thought crime’ tweet
Cardinal Robert Prevost Elected as Pope Leo XIV, Marking a Historic Papacy
Newark Mayor Ras Baraka Arrested at ICE Facility Amid Congressional Visit
India-Pakistan conflict may be first test for Chinese military tech
Bill Gates Announces Plan to Wind Down Philanthropic Foundation and Disperse Wealth
Historic Papal Conclave Set to Commence in Rome
Huge Copper, Gold, and Silver Discovery in Argentina and Chile — But the Profits Go Abroad
Prince Harry is pleading for reconciliation — but the royals are just as sick of his victimhood as everyone else
The Road to Freedom: She Protested Putin, Escaped House Arrest, and Survived a 2,800-Kilometer Journey
OpenAI's Flip-Flop: No Longer Going Commercial, Back to Nonprofit, After Musk Lawsuit and Backlash
“Trump Supporter” Aims to Bring a MAGA-Style Shift to Romania
First From China: Zhao Xintong Wins the Snooker World Championship
Nvidia Faces Billion-Dollar Losses – Warns: China Is on Its Way to Becoming an AI Superpower
Trump Rules Out Third Term, Names JD Vance and Marco Rubio as Potential Successors
Mexico Says ‘No’ to U.S. Troops: President Sheinbaum Rejects Trump’s Offer to Fight Cartels
Nigel Farage’s Reform UK Storms the Map, Wrecking the Two-Party Monopoly
DOGE: Reimagining Government Operations with AI
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Beijing Says U.S. Is ‘Reaching Out’ for Tariff Talks Amid Soaring Trade Tensions
U.K. Court Rejects Prince Harry’s Final Appeal Over Police Security
Prince Harry’s Heartfelt Outburst Rocks the Royal Family
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Transgender Swimmer Secures Five Gold Medals at U.S. Masters Championship
Prince Harry: “I Want Reconciliation with My Family”
Germany's Alternative für Deutschland (AfD) party has now been officially labeled “right-wing extremist” by the federal office for the so-called “protection of the constitution.”
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
Transformative Changes in Women's Wrestling: The Rise of WWE Superstars
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
This is a day in Spain without electricity and internet
Reform UK Surprises in British Elections, Challenging Traditional Two-Party System
180-Year-Old Christian University in South Carolina Announces Closure Due to Unmet $6 Million Fundraising Goal
Brazilian Woman Jailed for Fourteen Years for Writing “You Lost, Idiot” on Statue During Protest
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Dutch Politician Eva Vlaardingerbroek Receives Spyware Threat Alert from Apple
Paramount Board Considers Settlement in Trump’s $20 Billion Lawsuit Over "60 Minutes" Interview
U.S. Economy Shrink in Trump’s First Quarter as Tariff Policy Raises Questions
Deadline Looms for RTS Meter Replacement: Hundreds of Thousands at Risk of Heating Disruption
Sweden Grapples with Deadly Gun Violence: Suspect Arrested After Three Young Men Killed in Uppsala Hair Salon
Walz Reveals Why Harris Chose Him as Her Running Mate and Reflects on Democratic Losses
Spain Restores Power After Unprecedented Nationwide Blackout
Carney Secures Liberal Mandate in Canada’s Federal Election
Death Penalty Sought as Luigi Manion Pleads Not Guilty in CEO Murder Case
President Trump contacts Jeff Bezos after reports of Amazon considering listing tariff surcharges; company clarifies no such plan for main platform
Spain and Portugal Recover from Massive Blackout
Liverpool Clinches Record-Equalling 20th English League Title Under Arne Slot
Singapore Politicians Warn Against Foreign Interference in Election
Driver Ploughs into Vancouver Festival Crowd, Killing Nine
Depression, Fear of Defamation, and a Tragic End: New Details on Virginia Giuffre’s Suicide
“Sharia for UK, Allah Akbar!”
Massive Explosion at Iran's Bandar Abbas Port Linked to Suspicious Chemical Shipments
×