Big tech earnings signal ad market rebound

Big tech bellwether companies like Google, Meta and Snap have reported healthy numbers in the third quarter on the back of ad spends picking up after a long lull.

These companies had begun using terms like “year of efficiency” and spoke of shedding their workforce as companies across the world were forced to trim marketing spends owing to the pandemic and geopolitical tensions.

However, things were different in the quarter ended September 30.

Google, Meta and Snap have embraced AI and the results indicate that marketers are being drawn to their platforms.

All three companies surpassed quarterly revenue expectations as they announced their numbers this week and each posted positive metrics for their ad businesses. Positive results from these companies are generally viewed as being indicative of positive sentiment in the market for the industry at large.

Google’s highlights pertaining to ad revenue:

Google parent Alphabet posted a 9.5% jump in ad revenue in the third quarter ended September. Its YouTube ads business went up 12%.

Executives said the growth came both from brand and direct ads. Last year, ad revenue for the platform had dropped by 1.9%.

On the earnings call, executives said the company’s investments in AI are helping advertisers.

Nearly 80% of advertisers are using at least one AI-powered search ad product.

AI tools such as Dreamscreen and YouTube Create are revolutionising content creation, Alphabet chief Sundar Pichai said.

The company also called out Spotlight Moments, launched last week, which uses AI to identify trending content for brand sponsorship.

Pichai highlighted that Shorts, YouTube’s TikTok-style format, now boasts 70 billion daily views, a significant increase from around 50 billion daily views at the start of the year.

Alphabet’s share fell almost 9.6% on account of Google’s cloud revenue growth slowing to 22.5% in the third quarter from 28% in the previous quarter. This was despite the company meetings expectations on overall revenue and profits.

Meta’s highlights pertaining to ad revenue:

Facebook parent Meta said its ads viewed in the quarter increased by 31% from a year earlier.

The company’s average price per ad decreased by 6%, but the pace of the fall was the slowest in seven quarters.

It has leaned heavily on AI-powered marketing planning and ad measurement features as a response to privacy changes led by Apple that restricted its ability to use personal data to target ads.

It is now rolling out tools that use generative AI to create different variations of ad campaigns.

Meta said its revenue from click-to-message ads in India has doubled year-over-year (YoY) as the company continues to push WhatsApp business messaging in the country which is its largest market.

Zuckerberg said he thinks this is going to be a “really big opportunity” for new business AIs that he hoped would enable any business to easily set up an AI that people can message to help with commerce and support.

Amidst this perceived rebound in ad spend, Meta chief financial officer Susan Li, however, did warn that the company had detected “softness” in ad spending at the start of the fourth quarter that appeared to be related to the Israel-Gaza conflict.