The strong showing by Alphabet, Meta, and Snap in their advertising businesses indicates that the adoption of artificial intelligence (AI) is attracting marketers to digital platforms, even in an uncertain economy.
The recent quarterly revenue results of these three companies exceeded expectations, with each of them reporting positive metrics for their ad businesses. AI plays a crucial role in helping advertisers reach as many people as possible and target their ideal audience at the lowest cost. Philipp Schindler, the chief business officer at Alphabet’s Google, emphasized the strength of the retail segment during the July-September period. Google has been investing in AI technology, such as Performance Max, which uses AI to allocate marketing budgets across Google’s ad network.
Alphabet saw a 9.5% increase in ad revenue in the July-September quarter, surpassing Wall Street estimates. Its YouTube ads business experienced a significant 12% growth. Although Meta witnessed a 6% decrease in the average price per ad, it was the slowest decline in seven quarters. To drive its growth, Meta has heavily relied on AI-powered marketing planning and ad measurement features. The company is now rolling out tools that utilize generative AI to create different variations of ad campaigns. Analysts from RBC noted that Facebook/Instagram’s tools for creating marketing campaigns are faster and easier to use compared to those of smaller rivals like Snap, potentially giving Meta a competitive edge.
Snap’s efforts to enhance its ad-targeting tools with technology paid off, as the average revenue per user increased in the third quarter. Analysts believe that the ad market rebound is progressing well, with retail companies leading the way in ad spending. Google and Meta are considered the primary beneficiaries of this recovery. These larger platforms are seen as more resilient to uncertainty caused by geopolitical turmoil, such as the Middle East conflict, due to their broad reach, which attracts a steady stream of advertisers. However, Meta’s Chief Financial Officer Susan Li mentioned that the company observed a softness in ad spending at the beginning of the fourth quarter, potentially related to the Israel-Gaza conflict.
According to media research and investment firm Magna, the forecast for U.S. ad spending growth has been raised to 5.2% for calendar 2023, with digital ad sales expected to rise by 9.6% during that period.
Overall, the success of Alphabet, Meta, and Snap in their ad businesses indicates that AI-driven digital platforms are becoming increasingly attractive to marketers, even in uncertain economic conditions.
