Softening Ad Revenue
A diverse array of companies is being adversely impacted by a slowing advertising market as consumers dial back their spending amid soaring inflation. The trend is showing up on some of these companies’ bottom lines. Technology operations like Facebook parent Meta Platforms (META), and Alphabet (GOOGL) have all cited diminished ad revenues for recent disappointing quarterly results.
Similarly, Warner Bros. Discovery (WBD) blamed slowing ad revenue while making a downward revision to its outlook for 2022 and 2023. Walmart (WMT) executives recently observed that high gas and food prices are causing consumers to cut back on purchases. WPP’s (WPP) ad buying company, GroupM, saw the statement as a red flag indicating more advertisers will be cutting back on spending.
Large Ad Firms Holding Up
While tech, broadcasters, and other companies are seeing their bottom lines impacted by the shrinking ad spend, top global advertising agency networks are bucking the negative trend. The biggest agency holding companies like WPP, Omnicom Group (OMC), and Interpublic Group (IPG) have recently bested their prepandemic growth rates.
These companies have raised revenue growth outlook to 6 to 7 percent, in some cases representing a 33% increase. The revision is notable given it reverses an earlier trend of platforms such as Google and Facebook gaining market share at their expense.
All Eyes on the Consumer
Market observers contend the shift reflects demand for “digital transformation work” that came out of the pandemic. The term refers to companies’ online operations including ecommerce. In addition, global companies are turning to big players in the space because it can be more efficient to work with just one firm. The sheer size of these companies allows them to achieve scale and provide numerous disparate services at a time.
All companies that count on ad revenue to support their bottom lines will be watching consumer behavior. Spending patterns will drive marketers’ motivation, and ultimately determine the size of the ad dollar pie.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.