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A test for tech: Advertising weakness forces firms to rethink strategy

16 November 2022
Access report

Online advertising growth at big tech firms has flatlined, with real-term declines at Meta and YouTube. The weakness is concentrated in higher funnel ads.

Advertising is a leading indicator. A hardware slowdown is coming, services growth is stuttering, and businesses will want to save on cloud services.

Investors are hostile to attempts to spend through a downturn, but competition from TikTok and developments in AI demand targeted investment, while Meta is pot-committed to the metaverse. Tech giants are looking for savings elsewhere.

 

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    Meta suffered its first year-on-year revenue decline in Q2, as long-standing challenges crystalise and an economic slowdown in the US dents display ad spend. 

    In response, Meta is retooling its products to neutralise threats from post-social competitors like TikTok, and trying to minimise the impact of data restrictions. 

    The long-term pivot to the metaverse is Zuckerberg's next big bet, but funding it depends on core business strength. 

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    YouTube’s tepid quarter signals a two-track online ad economy with advertisers protecting search spend as an essential cost of sales while cutting online display.

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