Decline in advertising activity on YouTube is a worrying sign for the online advertising market

A YouTube logo seen at YouTube Space LA in Playa Del Rey, Los Angeles, California, United States, October 21, 2015.

Lucy Nicholson | Reuters

The online advertising market continues to suffer, the heavyweights Alphabet and Microsoft reported disappointing sales in their last quarters.

YouTube ad revenue fell 2% year-over-year to $7.07 billion during parent Google’s third quarter, missing analyst estimates of $7.42 billion . It was the first time YouTube’s advertising revenue had fallen year-over-year since the company began reporting results for the division in 2019.

Drastic increase in overall Alphabet revenue decreases from 41% a year ago to 6%, underscoring how fears of a looming recession have pushed businesses to cut spending advertising and marketing campaigns. Indeed, Chief Financial Officer Ruth Porat said on a call with analysts that YouTube’s revenue decline “primarily reflects further declines in advertiser spending.”

Some of the advertisers who have slowed their online ad spend with Alphabet come from the financial services, insurance, lending, mortgage and crypto industries, said Philipp Schindler, Alphabet’s chief commercial officer.

Snap set the tone for the online advertising market last week when it missed analysts’ estimates for the third quarter with $1.13 billion in sales, sending its shares tumbling more than more than 30% the next day. Snap attributed its weak sales to businesses decreasing their marketing budgets” in response to the weak economy, the company said in a letter to investors.

Microsoft too reported a slowdown in its online advertising activity.

Its news search and advertising business (including Bing and Microsoft News) saw sales growth of 16% in the September quarter, the first of its fiscal year, well below revenue growth of 40 % announced a year earlier. Indeed, the growth rate of this business has declined in each quarter of the past year, coinciding with the general downward trajectory of the overall online advertising market.

Additionally, Microsoft’s LinkedIn quarterly sales growth fell to 17% from 42% in the same period in 2021.

Microsoft chief financial officer Amy Hood told analysts in a phone call that “reductions in customer ad spend, which also declined later in the quarter, impacted search in solutions. of LinkedIn advertising and marketing”.

Meanwhile, Meta Wednesday is expected to report its second consecutive quarter of declining sales, underscoring the ongoing turmoil in online advertising. Judging by recent earnings reports from various tech giants, Facebook’s parent company is unlikely to signal any signs that the online advertising market is about to rebound.

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