Ads are back in full force.
After a tough 2022, when brands redirected spending to combat inflation, and a 2023, marked by layoffs and cost cuts, top digital advertising companies are back to healthy growth.
Meta, snap and Google All companies reported first-quarter results this week, with sales growth faster than analysts expected and at a pace not seen in at least two years. The company’s financials were primarily driven by improvements in its overall advertising business.
Companies entered earnings season in a favorable position, with numbers comparable to historically weak periods. However, investors and analysts were cautious in their expectations given the ongoing challenges posed by political and economic instability in various markets around the world and high consumer prices.
Meta, the first member of the group to report results, on Wednesday showed first-quarter sales rose 27% to $36.5 billion, allaying some concerns. This was the strongest expansion rate for Facebook’s parent company since 2021.
“When Meta fell into the dark ages two years ago, the company knew what it had to do to get back on track,” Bernstein analysts wrote in a post-earnings note. ing. “To their credit, the meta protected the core.”
Those dark times were due to macroeconomic challenges and apple iOS privacy changes have made it harder for social media companies to target users with ads. Meta lost two-thirds of its value in 2022 and was forced to make significant headcount cuts.
Your phone displays Facebook, with a meta icon in the background.
Jonathan Ra | Null Photo | Getty Images
Meta responded by leveraging significant investments in artificial intelligence to restructure its advertising system to deliver value to brands despite the obstacles Apple imposed. The stock price nearly tripled in 2023.
The company’s first-quarter results beat expectations across the board, but CEO Mark Zuckerberg’s post-earnings comments focused on the many ways Meta is spending money outside of advertising, particularly in the Metaverse. Stocks fell sharply on Thursday after the company tightened its grip.
“We have historically experienced significant stock price volatility at this stage of our product strategy, where we are investing in new product expansion but have not yet realized profitability,” Zuckerberg said on an earnings call late Wednesday. said.
Bernstein analysts, who recommend the stock to buy, say Meta’s ad revenue is driven by strength in online commerce, gaming, entertainment and media, and China-based ad demand “remains strong.” said. Meta has benefited from a surge in spending from Chinese discount retailers such as Temu and Shein.
“Without sounding overly religious, you either believe in Zack or you don’t, but we do,” the analysts wrote.