Big tech ad revenue growth to taper as pandemic bubble pops -analyst
1:01 pm Thursday, May 26th, 2022
By Sheila Dang
(Reuters) – After unprecedented revenue growth last year, digital platforms including Alphabet Inc, Meta Platforms Inc, Snap Inc and Twitter Inc now face a sobering reality as pandemic-driven advertising trends dissipate, according to an analyst report on Thursday.
Research firm MoffettNathanson cut its 2025 revenue estimates for each of the four companies by double-digit percentages.
U.S. digital ad spending surged 38% in 2021 over the previous year. Alphabet, the largest digital advertising platform in the world, posted record revenue of $257 billion that year.
While the companies have warned of pressure from inflation, the Ukraine war and the end of a COVID-induced lift to advertising, the report estimates for the first time the potential impact to revenue over the next few years.
“After years of uber-bullishness, we are truly concerned about longer-term growth in digital advertising,” wrote Michael Nathanson, an analyst at MoffettNathanson, in the report.
Growth in the advertising market last year was driven in part by an “unprecedented spike” in profitability at companies that saved money on office space and expansion and had more to spend on marketing, as well as brands spending on ads to drive customers to shop online, Nathanson wrote.
But e-commerce as a percentage of retail sales has fallen back to pre-pandemic levels, and corporate expenses are likely to rise as workers return to the office, according to the report.
The firm said it now expects online advertising in the United States to grow by 12.5% annually through 2025, down from the previous estimate of 18.5% annual growth.
(Reporting by Sheila Dang in Dallas; Editing by Matthew Lewis)