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Ad spending slowdown hits tech and social media firms, but not equally

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The Google logo, a multicolored capital G.

Google is expected to comprise 30% of total worldwide digital ad revenues this year, one analyst said. Meanwhile, Snapchat and Twitter are each expected to make up under 1%. Robyn Beck/AFP via Getty Images

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What do Google, Snapchat, TikTok and Facebook all have in common? Business models that rely on selling ads. Because of that, they share something else: a problem.

Lately, ad spending is not what it used to be. But the slowdown is not hitting all tech platforms equally.

“There is a pretty unprecedented number of problems that are affecting advertising-based companies right now,” said Jasmine Enberg, a principal analyst at Insider Intelligence.

One big problem? Inflation.

“Corporations, the ones that spend money on marketing campaigns, are seeing cost inflation in a variety of other parts of their business,” said Mark Mahaney, a senior managing director at Evercore ISI. “So at the margin, that probably means they have less money to spend on marketing.”

So it’s no surprise then that ad-based companies’ earnings have slowed down — but they’ve not slowed down equally. Alphabet’s earnings were better than expected, Twitter’s were disappointing and SNAP’s were dismal.

“No advertising revenue platform is recession-proof, but not all ad platforms are created equal, and some are gonna be more recession-resistant,” Mahaney said.

We hear and talk about Snapchat and Twitter a lot, but in terms of ad revenue, they’re tiny; sometimes, they’re even considered experimental advertising. Google and Meta are huge.

“We are expecting Snapchat and Twitter each to make up under 1% of total worldwide digital ad revenues this year,” said Insider Intelligence’s Enberg. “Compare that with Google, which is up close to 30%.”

So, it’s the little guys that are getting get stung worse here. But ad revenue slowing down is different from declining.

“Overall in the industry, we don’t see a decline in store,” said Kate Scott-Dawkins with media investment company GroupM.

Some companies may lose ground, others may gain: TikTok’s growth has been explosive, for example. But overall, Scott-Dawkins said ad revenue growth for the industry will be in the low double digits — not terrible, just not the 50% to 60% growth some companies saw last year.

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