Big Tech Q1 Earnings To Peel Back Curtain On Digital Ad Market

Big Tech is still bigger than ever. The five — Apple, Microsoft, Amazon, Alphabet and Meta — generated $1.5 trillion in sales last year.

Despite record earnings, growth is slowing and the group will face a moment of reality this week when it releases all of its first quarter financial results. While investors have spotted some major trends, executives’ opinions on the state of the digital advertising market continue to be front and center.

After seeing very strong growth in advertising, digital advertising has officially begun to decline, falling from 35.4% in the US in 2021 to 10.8% in 2022, according to a new report from the IAB and PwC.

To be honest, 2021 was a big growth year, but last year’s digital advertising growth was lower than 2020. So digital advertising is still in growth mode, growing slower than us. He’s used to it.

There are several reasons for this weakness in the digital advertising market last year. First, the overall macroeconomic slowdown forced most marketing and advertising spending to decline in the second half of the year. Additionally, privacy regulations and Apple’s efforts to protect consumer privacy have had a significant impact on targeted advertising across Big Tech. Social media companies like Meta and Snap have been hit particularly hard.

The regulations have been a major pain for the Big Tech companies that dominate the digital advertising market, especially the MetaGoogle duopoly. Unfortunately, this couple has been losing ground lately.

According to Insider Intelligence, Meta and Google will account for 60.6% of US digital ad revenue in 2022, up from 61.6% a year ago. The collapse of the meta-Google duopoly is set to continue, as other players including TikTok’s parent company ByteDance and Amazon continue to steal market share.

Even if we narrow from there, the market share of the top 10 publishers and digital platforms will drop to 76.8% in 2022, the first decline since 2016.

Despite the slowdown, it’s not all bad news for digital media, and there’s reason to be optimistic about the space.

First, heightened privacy concerns are fueling the growth of retail media networks, which use retail media platforms to sell advertising space to marketers. Today, Amazon is the largest retail media network player.

According to some Wall Street analysts, retail media will account for a quarter of global online advertising spending by 2025, and that’s because the consumer data these retailers provide is so valuable to brands.

Then there’s the potential increase in the digital advertising market with the growth of ad-supported streaming video. After a lukewarm start, Netflix’s new ad-supported tier is gaining momentum. While Netflix management did not provide us with the number of ad-supported users, it reports that ARPU from ad-supported users is higher than its premium subscription offering.

Finally, there is the connected TV market, a key area for digital advertising growth. As more people consume TV content directly from apps on their smart TVs, advertising revenue is increasing. Companies like Roku, Amazon, Comcast and Charter are on board, and it’s only a matter of time before others follow. From now on, it’s a question of when.

Contrary to the sad story we heard at the end of the year 2022, many seem to be more optimistic about the second half of this year, although the recession is still deep. By reallocating profitability and finances, businesses grow more efficiently with marketing and advertising spend.

Big Tech’s first quarter results shed light on the health of the digital ad market, and any advice or insight you can provide will help us know if the worst is behind us and recovery is underway.

The CTOs of Facebook, Google, Apple and Amazon will testify at the 7/27 hearing (live).

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