On March 23, 2024, a view of the Google headquarters in Mountain View, California, USA.
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Advertising just came back.
After a brutal 2022, when brands slashed spending to combat inflation, and 2023 of layoffs and cost-cutting, top digital advertising companies have begun to grow healthily again.
Yuan, break and Google All of these companies reported first-quarter results this week, with revenue rising above analysts’ expectations and at a pace not seen in at least two years. Their financials were primarily driven by improvements in their advertising business.
These companies are well-positioned heading into earnings season as their results are in line with historically weak periods. But investors and analysts are cautious about expectations given the ongoing challenges posed by political and economic instability in markets around the world and high consumer prices.
Meta was the first company in the group to report results, with first-quarter revenue rising 27% to $36.5 billion, allaying some concerns. This is the strongest expansion rate so far in 2021 for the Facebook parent company.
“When Meta was in its dark days two years ago, the company knew what they had to do to get back on track,” analysts at Bernstein wrote in a note following the earnings release. “To its credit, the company knew what it had to do to get back on track.” Meta defends the core.”
That dark age was driven by macroeconomic challenges and apple iOS privacy changes make it harder for social media companies to target ads to users. Meta lost two-thirds of its value in 2022 and was forced to make significant layoffs.
The smartphone is displaying Facebook with the Meta icon visible in the background.
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Meta responded by rebuilding its advertising system with the help of significant investments in artificial intelligence so that it could still create value for brands despite Apple’s hurdles. In 2023, the stock nearly tripled.
Although the company’s first-quarter results beat expectations across the board, the company’s stock price fell sharply this week after CEO Mark Zuckerberg focused his post-earnings comments on the many ways Meta spends money outside of advertising, particularly in its metaverse. Four plunges.
“Our stock has historically experienced a lot of volatility at this stage of our product strategy, and we are investing in scaling new products but not yet monetizing them,” Zuckerberg said during an earnings call Wednesday night.
Analysts at Bernstein, who recommend buying the stocks, said Meta’s ad revenue is driven primarily by strong growth in online commerce, gaming, entertainment and media, and that ad demand in China “remains strong.” Meta has benefited from a surge in spending by Chinese discount retailers such as Temu and Shein.
“Without sounding too pious, you either believe Zach or you don’t, and we do,” the analysts wrote.
“More and more positive”
During a quarterly conference call with investors, Alphabet Finance Chief Ruth Porat said the company was “very pleased” with the momentum in its advertising business.
Citi analysts wrote in a note on Friday that the broader advertising environment is “clearly strengthening,” noting that growth in Google search and YouTube is accelerating.
“We are increasingly bullish on Alphabet stock based on first-quarter results,” the analysts wrote, maintaining a buy recommendation.
Snap shares soared 28% on Friday after the company reported revenue growth of 21% to $1.19 billion, its strongest growth in two years. Over the past six quarters, Snap’s sales have either grown by single digits or declined.
The company said demand for its advertising platform is accelerating and is benefiting from an improving operating environment, according to its investor letter.
Analysts at Deutsche Bank wrote in a note on Friday that Snap has achieved “much-needed” goals and its ad stack is back on track. Analysts with a buy rating on the stock said investors appear to be “most encouraged by investments in advertising platforms, which are showing increasing promise.”
Despite the gains, Snap shares are down 14% this year.
Investors will have a clearer understanding of the digital advertising market next week, interest Tuesday report Amazonhas become a giant in the field of online advertising. Reddit This will be followed on May 7 by the first earnings report since the social media company’s March initial public offering.
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