Technology
Monday, February 5th, 2024 3:28 pm EDT
Key Points
- A year ago, Meta’s finance chief, Susan Li, expressed concerns about the digital ad market’s state, anticipating a prolonged slump due to weak advertising demand and a volatile macroeconomic landscape.
- Recent results from Alphabet, Meta, and Amazon, the U.S. digital advertising leaders, reveal a significant market rebound. Meta’s Q4 ad sales surged 24% to $38.7 billion, Amazon’s ad unit rose 27% to $14.7 billion, and Alphabet’s Google ad business increased 11% to $65.5 billion, boosted by 16% growth at YouTube.
- Positive outlooks for global ad spending in 2024, fueled by major events like the Summer Olympics and upcoming presidential elections, indicate a shift from the industry’s relative malaise in the past two years. Analysts note improved macroeconomic conditions for digital advertising, with businesses showing less concern about the Russia-Ukraine conflict and a potentially more favorable interest rate outlook. Investments in AI by Meta and Alphabet contribute to the positive trend. However, concerns linger about the sustainability of China-based advertisers’ heavy spending and the impact of the conflict in the Red Sea on supply chain bottlenecks and potential reductions in ecommerce ad spending. Investors await earnings reports from smaller players like Snap and Pinterest to gauge the broader landscape in an environment where major companies are gaining dominance in digital advertising.
A year ago, Meta’s finance chief, Susan Li, painted a bleak picture of the digital ad market, anticipating a prolonged slump due to weak advertising demand and a volatile macroeconomic landscape. However, recent results from Meta, Alphabet, and Amazon, the leading players in U.S. digital advertising, reveal a significant market rebound. Meta’s fourth-quarter ad sales surged 24% to $38.7 billion, Amazon’s ad unit rose 27% to $14.7 billion, and Alphabet’s Google ad business increased 11% to $65.5 billion. The revival is attributed to global events like the Summer Olympics and upcoming presidential elections, driving higher ad spending. Analysts expect a 10% growth in global ad spending in 2024, reflecting a positive outlook worldwide. Investments by Meta and Alphabet in artificial intelligence to enhance their ad platforms are paying off, contributing to the favorable macroeconomic environment for digital advertising. While the current momentum is strong, questions linger about sustaining growth in subsequent quarters, with comparisons to the bleak conditions a year ago influencing the perception of robust growth. China-based advertisers are also contributing to the surge, with Meta reporting that sales from China accounted for 10% of revenue last year, driving 5 percentage points of growth. However, concerns arise about the sustainability of spending by Chinese online retailers like Temu and Shein. Meta anticipates challenges in replicating the level of growth from its China business in 2023. Analysts at Bank of America Global Research caution against overlooking the conflict in the Red Sea, causing supply chain bottlenecks and potentially leading ecommerce companies to reduce ad spending. While exposure for Alphabet and Meta is deemed modest, ongoing geopolitical events and shifting economic conditions pose uncertainties for the future trajectory of the digital advertising market. Investors await additional insights from Snap and Pinterest’s upcoming earnings reports to gauge the overall landscape, recognizing the dominance of major players in an environment where “the big are getting bigger” in digital advertising.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/05/digital-ads-show-signs-of-rebound-as-meta-amazon-point-to-growth.html
