Alphabet’s earnings report confirmed a big ad spending slowdown, and that bodes poorly for Meta

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Google CEO Sundar Pichai talking
Alphabet CEO Sundar Pichai

  • Google’s ad revenue fell by nearly $2B compared to the previous quarter, proving a slowdown in the ad market
  • The disappointing results are a “bad omen” for digital advertising companies at large, including Meta. 
  • The numbers follow Snap, which also reported that advertising partners are “decreasing budgets.” 

Alphabet’s quarterly results prove the advertising market is suffering, and that bodes poorly for other companies that make most of their money from ads, including Meta. 

On Tuesday, Alphabet reported that Google’s third-quarter advertising revenue fell sequentially by nearly $2 billion compared to this year’s second quarter. Alphabet’s CFO Ruth Porat attributed the decline to a “pullback in advertiser spend in some areas” on the company’s earnings call.

“When Google stumbles, it’s a bad omen for digital advertising at large,” said Evelyn Mitchell, principal analyst at Insider Intelligence, a research firm owned by Insider’s parent company. 

To be sure, Google’s weaker-than-expected results could signal trouble for Meta, which has already reported slowing advertising revenues in previous quarters. 

In a recent note, Mark Mahaney, an analyst at Evercore, wrote that he expects Meta’s third-quarter ad revenue to decline 5% compared to last year when it reports earnings on Wednesday. 

A further drop in advertising revenue for Meta could add to investors’ anxiety as the company has recently drawn ire from analysts and at least one prominent investor for its — so far  unprofitable pivot to the metaverse. 

However, Google’s disappointing results were not the first sign of the continued digital ad slowdown. Snap also reported weak quarterly results last week. 

“We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital,” Snap wrote in a letter to investors. 

Read the original article on Business Insider