# Digital ad market shows ‘signs of life’ but economy clouds 2023 outlook Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-10-19 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Tech and Social Media Earnings: Challenges Ahead in 2023 Meta Description: Snap Inc, Alphabet Inc, and Meta Platforms Inc face revenue growth challenges amid global uncertainties and changing ad landscape in Q3 earnings reports. URL: https://financedigest.com/digital-ad-market-shows-signs-of-life-but-economy-clouds-2023-outlookhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-10-19t184256z1lynxmpei9i0sfrtroptp4snap-results-1736814994193-compressed.jpg) By Sheila Dang and Katie Paul (Reuters) – When Snap Inc kicks off the third-quarter earnings season for tech and social media companies on Thursday, investors are expecting modest revenue growth across most of the sector as results will be compared with a difficult 2021 when Apple Inc privacy changes began to upend the advertising industry. But a possible recession next year makes forecasting 2023 financials a guess at best, say some analysts, while investors are wary of reading too deeply into “signs of life” like ad spending around the fall shopping season as indicators of future performance. The challenging [outlook follows a period in which record-high inflation](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") and global geopolitical uncertainty from the war in Ukraine and U.S.-China tensions have led [companies to slash marketing](https://www.financedigest.com/5-digital-marketing-tips-to-keep-insurance-companies-competitive.html "5 digital marketing tips to keep insurance companies competitive") budgets. This has hurt [tech platforms that earn](https://www.financedigest.com/tech-earnings-hit-pause-button-on-market-rally.html "Tech earnings hit pause button on market rally") the bulk of revenue by selling digital ads and has led to cost-cutting to preserve profitability. Overall, we believe the online ad environment remains choppy, with [continued volatility week by week,” JP Morgan analysts wrote in a note to clients](https://www.financedigest.com/impact-com-continues-momentum-in-the-first-quarter-fueled-by-client-growth-new-products-and-partnership-events.html "impact.com Continues Momentum in the First Quarter, Fueled by Client Growth, New Products and Partnership Events") on Oct. 4. Tech companies have taken steps to prepare for the worst through [cost cuts](https://www.financedigest.com/gms-cruise-to-focus-on-cost-cuts-as-it-ramps-up-robotaxis.html "GM’s Cruise to focus on cost cuts as it ramps up robotaxis"), halting hiring, reining in employee perks and focusing on profitable projects. That has helped reassure [Wall Street](https://www.financedigest.com/weary-wall-street-cheers-improved-consumer-confidence.html "Weary Wall Street cheers improved consumer confidence") in the short term, some analysts said. On Thursday, Snap is [expected to report](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report") 6% growth in revenue to $1.13 billion, according to IBES data from Refinitiv. This would represent the slowest-ever quarterly [revenue growth](https://www.financedigest.com/visa-revenue-growth-slows-more-as-tough-economy-sobers-spending.html "Visa revenue growth slows more as tough economy sobers spending") for Snap as a public company. The Snapchat [owner is often the first to report quarterly earnings and serves as a bellwether for the social media](https://www.financedigest.com/ladbrokes-owner-entain-buys-sports-media-business-365scores.html "Ladbrokes owner Entain buys sports media business 365scores") sector. [Snap shares are down 77% so far this year](https://www.financedigest.com/platinum-facing-biggest-deficit-in-years-as-carmakers-snap-up-metal.html "Platinum facing biggest deficit in years as carmakers snap up metal"). The company announced in August that it would [lay off 20% of its staff](https://www.financedigest.com/amazon-to-lay-off-staff-in-u-s-canada-and-costa-rica-by-end-of-day.html "Amazon to lay off staff in U.S., Canada and Costa Rica by end of day") and cut money-losing projects, blaming a deteriorating economy. Alphabet Inc’s Google, the [world’s largest digital](https://www.financedigest.com/fraud-in-a-mobile-digital-world.html "FRAUD IN A MOBILE DIGITAL WORLD") ad platform by market share, has fared relatively well due to the necessity of Google Search ads for brands. Its wealth of data for advertising and reliance on search-based ads have shielded the company from the impact of privacy changes that [Apple introduced last year on iPhones](https://www.financedigest.com/an-apple-a-year-half-of-iphone-users-will-upgrade-to-the-iphone-7.html "AN APPLE A YEAR: HALF OF IPHONE USERS WILL UPGRADE TO THE IPHONE 7"), which made it more difficult for platforms and brands to collect user data for personalized ads. Wall Street is [expecting Alphabet to report the highest growth of the Big Tech](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit") companies with an increase of 7.5% in ad revenue compared with last year. [CHALLENGES AHEAD](https://www.financedigest.com/how-can-financial-firms-tackle-the-challenges-that-lie-ahead-in-2021.html "How can financial firms tackle the challenges that lie ahead in 2021?") Meta Platforms Inc has been hurt by those changes, on the other hand, and investors will be scrutinizing the company’s results for evidence of improving user engagement with Facebook and Instagram and more [brands buying](https://www.financedigest.com/loreal-buys-luxury-brand-aesop-with-eye-on-china.html "L’Oreal buys luxury brand Aesop with eye on China") adds on newer features like TikTok competitor Reels, said analysts. Analysts on average [expect Meta to report a 4.5% decline in ad revenue](https://www.financedigest.com/russias-gazprom-expects-increase-in-2022-revenue.html "Russia’s Gazprom expects increase in 2022 revenue"), which would be the company’s second straight quarter of decline, according to Refinitiv data. [Shares of Meta are down 60%](https://www.financedigest.com/permitted-share-of-chinas-yuan-in-russian-wealth-fund-doubled-to-60-finance-minister.html "Permitted share of China’s yuan in Russian wealth fund doubled to 60% -Finance Minister") so far this year, hurt by fierce competition from short-form video app TikTok, and by its own expensive investment in building the metaverse and ads that are now less effective due to Apple’s privacy changes. The company now known as [Meta is a far cry from Facebook](https://www.financedigest.com/facebook-parent-meta-is-preparing-large-scale-layoffs-this-week-wsj.html "Facebook parent Meta is preparing large-scale layoffs this week – WSJ") one year ago,” said Debra Williamson, principal analyst at research firm Insider Intelligence. “After a dismal earnings report in Q2, we aren’t expecting Q3 to be any better. It’s very possible it will be much worse.” Ads from large retailers promoting back-to-school and fall shopping are expected to help lead to growth at [digital pinboard platform](https://www.financedigest.com/seenthis-launches-creative-platform-to-boost-performance-and-reduce-co2-emissions-in-digital-advertising.html "SeenThis launches Creative Platform to boost performance and reduce CO2 emissions in digital advertising") Pinterest Inc, said analysts at Bernstein in a note on Monday. Wall Street is [expecting revenue to grow](https://www.financedigest.com/german-economy-expected-to-grow-modestly-in-2023-european-commission.html "German economy expected to grow modestly in 2023 – European Commission") 5% from the prior-year quarter. However, some advertisers are shifting ad dollars to larger platforms that are used by more people and which have been proven to deliver sales results, said [Credit Suisse](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") analysts, which poses a risk to Pinterest’s revenue in the fourth quarter and next year. Twitter Inc, which is working to close a deal to be acquired by billionaire [Elon Musk](https://www.financedigest.com/elon-musk-and-others-urge-ai-pause-citing-risks-to-society.html "Elon Musk and others urge AI pause, citing ‘risks to society’"), has not yet announced a date to report third-quarter earnings. Twitter’s [results are unlikely to affect its share price](https://www.financedigest.com/immediate-lift-of-oxford-property-prices-to-result-from-new-direct-high-speed-rail-connection-with-london.html "“Immediate lift” of Oxford property prices to result from new direct high speed rail connection with London"), which is trading on the likelihood of the Musk deal closing. But the third-quarter results could be hurt by marketers spending less on [“brand ads” that build](https://www.financedigest.com/learning-from-the-disrupters-how-finance-brands-can-build-transformative-business-models.html "Learning from the disrupters – how finance brands can build transformative business models") name recognition, which constitutes most of Twitter’s business, said Bernstein analysts. Snap and Meta have become more known for so-called performance ads, which are used to drive [sales or website visits](https://www.financedigest.com/ikea-stores-owner-ingka-says-campaigns-help-boost-store-visits-and-sales.html "IKEA stores owner Ingka says campaigns help boost store visits and sales"). (Reporting by Sheila Dang in Dallas and Katie Paul in Palo Alto, Calif.; Editing by Matthew Lewis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---