Will big tech platforms feel a dip in ad spending?
Will big tech platforms feel a dip in ad spending?
Last week, a couple of the world’s largest advertising agency conglomerates reported less than spectacular results. Both Interpublic Group of Cos. and Omnicom Group reported weaker-than-expected revenues thanks to declining ad spending by the tech and telecom industries.
Analysts will be paying close attention as Alphabet and Meta announce results to see if they’ll be impacted by the decline in spending. We looked into the rough times in the ad business, and what they might be able to tell us about the broader economy.
Last year at this time, companies were plowing piles of cash into ads.
Keeping up that kind of spending never seemed realistic, said Brian Wieser at the consultancy Madison and Wall.
“We shouldn’t be surprised if growth looks slower on a year-over-year basis, because there was still a lot of money going into the advertising market a year ago that couldn’t last,” Wieser said.
Much of that came from tech, including crypto companies and rapid delivery firms flush with cash they raked in during the pandemic.
“The last fumes of spending from advertisers who depended on zero interest rates,” Wieser said.
He said Meta, Alphabet and other tech giants may end up feeling the pinch. “The evaporation of those advertisers will contribute to the soft growth on a relative basis that we’re likely to see from Meta as well as Alphabet, just because that’s where the money would have gone.”
But the money may still be going to big tech firms. While some companies have pulled back on spending with ad agencies, they may be deploying their marketing dollars in other ways.
The agencies’ loss may be the tech companies’ gain, said Paul Hardart, professor at NYU’s Stern School of Business.
“There may be more spending, ad spending on their platforms, because they can reach a larger audience and in a much more targeted way,” Hardart said.
Some good news for ad agencies? Pharmaceutical firms, car makers and food and beverage companies have increased their spending.
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