A view of Google's headquarters in Mountain View, California, US on March 23, 2024.
Taifun Coskun | Anatolia | Getty Images
The ad is back like this.
After a rough 2022, when brands were reeling in spending to deal with inflation, and a 2023 marked by layoffs and cost-cutting, major digital advertising companies are starting to grow again at a healthy pace.
dead, pop And Google All reported first-quarter results this week, with revenue growth beating analyst estimates and at rates not seen in at least two years. Their financials were primarily driven by improvements across their advertising business.
Companies entered earnings season in a favorable position as their numbers will be comparable to historically weak periods. But investors and analysts were cautious in their expectations, given the political and economic instability in various markets around the world and the ongoing challenges posed by rising consumer prices.
Meta, which was the first of the group to report results, eased some concerns on Wednesday, showing a 27% jump in first-quarter revenue to $36.5 billion. For Facebook's parent company, this was the strongest expansion rate since 2021.
“When Meta was in its dark days two years ago, the company knew what it needed to do to get back on track,” Bernstein analysts wrote in a note after the earnings report. “To their credit, Meta defended the core.”
That dark era was defined by a combination of macroeconomic and macroeconomic challenges apples Changing the privacy of the iOS operating system, making it difficult for social media companies to target users with ads. Meta lost two-thirds of its value in 2022 and was forced to significantly cut staff.
The smartphone displays Facebook with the Meta icon in the background.
Jonathan Ra | norphoto | Getty Images
Meta responded by rebuilding its advertising system, with the help of massive investments in artificial intelligence, so that it could deliver value to brands despite the barrier imposed by Apple. The stock will nearly triple in 2023.
While the company's first-quarter results beat estimates across the board, shares fell Thursday after CEO Mark Zuckerberg focused his post-earnings commentary on the many ways Meta is spending money in areas outside of advertising, particularly the Metaverse.
“We've historically seen a lot of volatility in our stock during this phase of our product catalog where we're investing in scaling a new product but haven't yet monetized it,” Zuckerberg said on an earnings call late Wednesday.
Bernstein analysts, who recommended buying the stock, said Meta's advertising revenue was driven by strong online commerce, gaming, entertainment and media, and that demand for advertising in China “remained strong.” Meta has benefited from increased spending from Chinese discount retailers such as Teemo and Shen.
“Without sounding overly religious, you either believe in Zuck or you don't, and we do,” the analysts wrote.
'Increasingly positive'
Alphabet followed suit on Thursday, reporting first-quarter ad revenue of $61.66 billion, up 13% from a year earlier, with YouTube ad revenue jumping 21% to $8.09 billion. The company as a whole grew 15%, a rate last seen in 2022, and the stock rose 10% on Friday, the biggest rise since 2015.
During the quarterly call with investors, Ruth Porat, Alphabet's chief financial officer, said the company is “very pleased” with the momentum of its advertising business.
The broader advertising environment is “clearly strengthening,” analysts at Citi wrote in a note on Friday, noting accelerating growth within Google Search and YouTube.
“We emerge from the first quarter results increasingly positive on Alphabet shares,” the analysts wrote, maintaining their buy recommendation.
Snap shares rose 28% on Friday after the company reported a 21% increase in revenue to $1.19 billion, the strongest growth in two years. In each of Snap's past six quarters, sales have increased or declined by single digits.
The company said it is seeing accelerating demand for its advertising platform and is benefiting from an improving operating environment, according to its investor letter.
Deutsche Bank analysts wrote in a report on Friday that Snap has achieved a “much-needed” success and that its ad group is back on track. The analysts, who have a buy rating on the stock, said investors appear “more encouraged by the advertising platform's investments, which show increasing promise.”
Despite the rise, Snap shares are still down 14% on the year.
Investors will get a clearer picture of the digital advertising market next week Pinterest Reports Tuesday side by side Amazonwhich has emerged as a giant in online advertising. Reddit This will follow on May 7, when earnings will be announced for the first time since the social media company's initial public offering in March.
