Meta’s Upcoming Earnings and Digital Ad Space
Following the potentially problematic earnings of Microsoft last week, the next major tech corporation to report earnings is Facebook’s parent company, Meta. In Meta’s case, investors and analysts are keen on seeing the current performance of the online ad sector, an industry that is valued at $616 billion worldwide. In 2019, 98% of Facebook’s revenue was comprised of digital advertising, with their ad revenue totalling $69.7 billion in 2019 alone. At the time, they had 8 million advertisers on the platform, but burden after burden came to the sector. First, Facebook was accused and found guilty of sharing user data with other firms, creating increased regulation in their security and privacy practices. Then, last year, iPhone creator Apple released updated privacy settings that force applications to request if the user would like their activity shared or concealed. With these roadblocks and other economic concerns, shares of Meta plunged roughly 64% throughout 2022.
Now, with recessionary concerns still looming over investors ahead, several are waiting to see if history repeats itself; at the height of the Great Recession of 2008, digital advertising saw major declines which stunted the growth of both larger and smaller tech companies. Furthermore, as we move forward in 2023, high-interest rates and inflationary pressures still weigh on the spending budgets of companies, potentially hinting at decreases in the dollars spent to advertise online. Currently, a recent survey poses new information on companies spending this year, pointing to a growth of only 3.3% in 2023 which is the lowest it has been in five years. Nevertheless, although we cannot know the state of advertising for certain, Meta’s earnings report on Wednesday after the bell may give better insight into the spending troubles of companies, the weakened consumer, and potentially, the downswing of the online advertising space.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
