The downward trajectory of consumer spending breaches the advertising industry with social media giants experiencing yet another quarter of lowered revenue and stock valuation.
Advertisers are implementing budget cuts to play it safe in the face of mounting inflation and fears of a worsening recession, which paints a gloomy picture for Google, Facebook and Snapchat.
Financial reports from Alphabet, Google's parent company, show a minor decrease in revenue, alarming investors due to Google's track record of stability during volatile economic periods. Unlike Wall Street's expectations, Alphabet's shares dropped by 5%.
"For a company the size of Google and as influential as Google to have such disappointing results (that means the ad industry) won't turn around in one quarter,” stated Insider Intelligence Analyst Evelyn Mitchell.
Instant Messaging App Snapchat also expects up to a 10% additional profit decrease in the next quarter due to tighter competition in the market.
"(Advertisers) are managing their spend very cautiously so they can react quickly to any changes in the environment,” explained Chief Executive Officer Evan Spiegel of Snap.
In light of the current trend, Facebook owner Meta Platforms mimics the rest of the economy by cutting costs and repurchasing its shares. Despite shares increasing by 23%, Meta too reported another revenue decline.
Meta points to the lowered advertising budgets of companies from the financial and tech sector. However, Meta Chief Financial Officer Susan Li cautions that there is no certainty about how the year will turn out given the market's continued volatility. Meta Global Business Group Vice President Nicola Mendelsohn remarked that even with the sluggish economy, advertisers maintain "cautious optimism" for 2023.
Mendelsohn added that advertisers in the U.S. expect an upturn in the market, unlike those in Europe. Meanwhile, China is displaying indications of improvement amidst economic uncertainty.
