Shulou(Shulou.com)11/24 Report--

Sina Science and Technology News Beijing time on October 25 morning news, Wall Street is preparing for the catastrophic performance of the Internet advertising industry. Last week, Snap reported disappointing quarterly results, sending its shares down 28%, the lowest since early 2019. Investors are turning their attention to Meta, the parent company of Facebook, and Alphabet, the parent company of Google, as well as giants such as Twitter, Pinterest, Amazon and Microsoft.

Recently, the US Internet advertising and mobile advertising industry is under serious scepticism. Meta's shares have fallen more than 60% this year, and the company is expected to report its second consecutive quarterly decline in revenue. Alphabet shares are down 30 per cent this year. The company reported a single-digit increase in its revenue outlook. With the exception of the quarter at the start of the epidemic, this will be the weakest period for Google's parent company since 2013.

The economic downturn and fears of recession have led many marketers to rein in spending. Meanwhile, Apple's changes to its privacy policy since last year continue to affect platforms that used to rely on user data for accurate advertising, especially Snap and Facebook.

UBS analysts said in a research note last week: "with more rumors of budget cuts and advertisers controlling the budget for the fourth quarter, sentiment in online advertising has been weak recently. looking ahead to 2023, we believe that planning with this level of macro uncertainty will lead to below-average expected growth, even if the macroeconomic reality does not deteriorate significantly."

UBS also said it would "lower performance expectations and target prices for the entire online advertising industry". Analysts said that through discussions with digital advertising marketing agencies, they found that "the advertising directors of many companies are cutting budgets, especially among smaller advertisers".

In a research report on Thursday, Snap said quarterly results were adversely affected by a range of factors such as platform adjustments, economic challenges and competition. Snap said for the second quarter in a row that it did not provide an outlook for the next quarter because it was difficult to predict future economic trends. "We have found that advertising partners in many industries are reducing their marketing budgets, especially in the face of an unfavourable operating environment, cost pressures caused by inflation, and rising costs of capital," Snap said.

If the third quarter is similar to the second quarter, Snap's poor results could mean a disadvantage for the industry as a whole. In July, Meta, Twitter, Pinterest and Google all reported weaker-than-expected results after Snap's results fell short of expectations.

Investors began to operate ahead of time last week. Pinterest shares fell more than 6 per cent on Friday after Snap's results. Pinterest fell nearly 5 per cent. Alphabet shares rose more than 1 per cent, but still underperformed the tech-heavy Nasdaq index, which rose 2.3 per cent.

However, some analysts believe that Snap's poor performance may not reflect the overall online advertising market. Meta and Alphabet have "built a multifaceted digital ecology", far surpassing the smaller Snap. As a result, these big companies are "more resilient to the weakness of digital advertising spending".

One bright spot in online advertising may come from Amazon. Amazon's digital advertising business grew by 18% in the second quarter, ranking first among all major companies in the industry. While retailers may reduce their advertising through Facebook and other platforms, Amazon is a more sticky platform for them because it is the main channel for consumers to shop. In order for their brands to attract more attention and consumers on Amazon, they must pay for the platform.

But even for Amazon, its core business has been affected this year. Amazon's growth has slowed significantly compared with the boom during the epidemic. Amazon's total revenue growth has remained in single digits for three consecutive quarters. Amazon shares are down 28% so far this year.

By the time Amazon releases its results on Thursday, investors should have a clearer understanding of the trends in the online advertising market and how badly advertisers' budgets have shrunk during this year's holiday season.

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