Big tech ad revenue growth to taper as pandemic bubble pops: analyst

By Reuters   May 26, 2022 | 06:16 pm PT
Big tech ad revenue growth to taper as pandemic bubble pops: analyst
Facebook, Google and Twitter logos are seen in this combination photo from Reuters files. Photo by Reuters
After unprecedented revenue growth last year, digital platforms now face a sobering reality as pandemic-driven advertising trends dissipate, according to an analyst report on Thursday.

Research firm MoffettNathanson cut its 2025 revenue estimates for each of the four companies by double-digit percentages.

US digital ad spending surged 38 percent in 2021 over the previous year. Alphabet, the largest digital advertising platform in the world, posted a record revenue of $257 billion that year.

While the companies have warned of pressure from inflation, the Ukraine war and the end of a Covid-induced lift to advertising, the report estimates for the first time the potential impact to revenue over the next few years.

"After years of uber-bullishness, we are truly concerned about longer-term growth in digital advertising," wrote Michael Nathanson, an analyst at MoffettNathanson, in the report.

Growth in the advertising market last year was driven in part by an "unprecedented spike" in profitability at companies that saved money on office space and expansion and had more to spend on marketing, as well as brands spending on ads to drive customers to shop online, Nathanson wrote.

But e-commerce as a percentage of retail sales has fallen back to pre-pandemic levels, and corporate expenses are likely to rise as workers return to the office, according to the report.

The firm said it now expects online advertising in the United States to grow by 12.5 percent annually through 2025, down from the previous estimate of 18.5% annual growth.

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