The big three global players in advertising have regained their mojo, with ad spend flowing without blockages after rounds of cost cutting and staff layoffs.
Google, Meta and Amazon -- the world’s biggest purveyors of advertising -- all posted a good set of numbers for the December quarter.
Analysts say the results indicate cautious optimism by advertisers after the advertising slide of late 2022 and 2023.
Advertising revenue at YouTube was up 15% to $US9.20 billion. Overall Google revenue grew 13.5% to $86.31 billion.
“We see continued upside for long-term advertising growth,” says Philipp Schindler, Google’s chief business officer.
Amazon’s advertising business, now the third largest after Google and Meta, grew 27% to $US14.65 billion.
“Our advertising services continue to improve and drive positive results,” says Andy Jassy, Amazon CEO.
Meta’s share price surged 20% after reporting net income, or profit, up 200% to $US14.017 billion and the company announced its first cash dividend of 50 cents a share.
And the upside continues. So far in 2024, Meta is seeing “strong, broad-based advertising demand” across verticals, particularly within online commerce and gaming.
“What we’re really seeing .. so far has been a reflection of the generally strong and broad-based advertiser demand that we saw in Q4,” Meta CFO Susan Li told analysts.
However, she warned of looking too far ahead. “If we’ve learned nothing over the last two years, it’s just that we’re operating in a highly uncertain environment,” she said.
Mike Proulx, VP research director at global consultancy Forrester, had predicted big media would get its mojo back in 2024.
“Meta’s 2023 results signal a promising year ahead as brands double down on advertising once again,” he says.
“It’s no surprise (founder and CEO) Mark Zuckerberg led off with AI as a major part of Meta’s long-term vision but the scope of which the company is leaning in is ambitious. It reaffirms that Meta is (or will become) an AI company above all else.
“While the metaverse was mentioned, it continues to take a back seat to AI, as it should.
“Meta expects even greater losses this year in its Reality Labs division which will only continue to raise questions as to how long the company digs its heels into an increasingly unsure bet.
“Threads continues to show promise as the leading X/Twitter alternative. It now has more people using it today than it did during its original launch peak. As X continues to degrade, Threads continues to benefit.”
Nikhil Lai, senior analyst at Forrester, says Google’s December quarter results signal the cost of accelerating the adoption of conversational, AI-integrated search.
“Significant layoffs and growing ad revenue were not enough to offset the company’s huge investments in AI,” says Lai.
“Nonetheless, Google’s Q4 2023 ad revenue was stronger than Q4 2022, when the company reported its first drop in ad revenue since the start of the pandemic.
“YouTube’s increasing ad revenue signals advertisers’ cautious optimism. Advertisers have weathered the last couple years’ macroeconomic uncertainty and are now ready to (re)invest in the top of the funnel to generate awareness, expand retargeting pools, and activate video advertising’s halo effects of branded search activity.
“Growing subscription revenue from YouTube TV will continue to offset declining ad sales and diversify Google’s revenue beyond search.”
Amazon’s ad sales beat expectations in the December quarter due to continued strong demand for search ads on Amazon’s site and app.
Lai says Amazon’s highly profitable ad business generates high-margin operating income that offsets Amazon’s losses from first-party product sales, third-party seller fees, physical store sales, and subscription services.
“Advertisers that sell on Amazon can verify the revenue impact of Sponsored Products ads, which attract media budgets seeking high yield and direct responses at the bottom of the funnel,” says Lai.
Amazon’s CFO Brian Olsavsky, speaking on a call with analysts, mentioned Amazon’s use of machine learning to heighten the relevancy of Sponsored Products ads.
Lai says this pressures sell-side retail media technologies such as Criteo, CitrusAd, PromoteIQ, Koddi and Moloco to heighten the relevance of advertising they deliver on retail media networks seeking to become scaled alternatives to Amazon.
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