After unprecedented revenue growth last year, digital platforms including Alphabet, Meta Platforms, Snap and Twitter are now facing a reality as paid advertising trends dissipate epidemics, according to an analyst report Thursday.
Research firm Moffett Nathanson has cut its 2025 revenue estimates for each of the four companies by multiples.
Spending on digital advertising in the United States increased by 38% in 2021 compared to the previous year. Alphabet, the world’s largest digital advertising platform, posted record revenue of $257 billion (about Rs 19,95,499 crore) that year.
As companies warn of inflation pressures, the Ukraine war, and the end of ad lift caused by the coronavirus, the report estimates for the first time the potential impact on revenue over the next few years.
“After years of Uber’s optimism, we are really concerned about the long-term growth in digital advertising,” Michael Nathanson, an analyst at MoffettNathanson, wrote in the report.
The growth in the advertising market last year was partly driven by an “unprecedented rise” in profitability in companies that saved money on office space and expansion and had more to spend on marketing, as well as brands spending on advertising to attract customers to shop online, Nathanson wrote.
But e-commerce as a percentage of retail sales has fallen to pre-pandemic levels, and corporate expenses are likely to rise as workers return to the office, according to the report.
The company said it now expects online advertising in the United States to grow 12.5 percent annually through 2025, down from a previous estimate of 18.5 percent for annual growth.
© Thomson Reuters 2022