YouTube’s ad business contraction is an ominous sign for the online ad market

The online advertising market continues to struggle. alphabet When microsoft reports disappointing sales in its most recent quarter.

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

Alphabet’s overall revenue growth dropped significantly to 6% from 41% a year ago. This highlights how fears of a looming economic recession are causing companies to cut back on advertising and marketing campaigns. In fact, Chief Financial Officer Ruth Porat said in a conference call with analysts that YouTube’s decline in revenue “primarily reflects further declines in advertiser spending.” .

Some of the advertisers who have controlled online ad spend at Alphabet come from the financial services, insurance, loans, mortgages and cryptocurrency industries, said Philip Schindler, Alphabet’s chief business officer.

Last week, Snap set the tone for the online ad market as it underperformed analyst expectations for the third quarter, hitting $1.13 billion in revenue and the stock fell more than 30% the next day.Snap blamed the company for poor sales “In a letter to investors, the company is cutting its marketing budget in response to the economic downturn.”

Microsoft also reported a slowdown in its online advertising business.

The search and news advertising business, which includes Bing and Microsoft News, reported 16% revenue growth in the first September quarter of the fiscal year, well below the 40% revenue growth reported last year. . In fact, the growth rate of this business has contracted quarter by quarter over the past year, consistent with the general downward trajectory of the online advertising market as a whole.

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

Microsoft CFO Amy Hood told analysts on the earnings conference call:

in the meantime, meta On Wednesday, sales are expected to decline for the second straight quarter, highlighting the current turmoil in online advertising. Judging by recent earnings reports from various tech giants, Facebook’s parent company is unlikely to report any indication that the online advertising market is poised for recovery.