Ad revenue growth drags digital giants into sobering reality

Reuters - After unprecedented revenue growth last year, digital platforms including Alphabet Inc, Meta Platforms Inc, Snap Inc and Twitter Inc now face a sobering reality as advertising trends dissipate, according to an analyst report on Thursday.

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

In 2021, U.S. digital advertising spending increased by 38% over the previous year. The report estimates the potential impact of the next few years over the next few years, despite the warnings from inflation, the Ukraine war and the end of a COVID-induced lift to advertising.

The growth in the advertising market last year was driven by an unprecedented spike in profitability at companies that saved money on office space and expansion, as well as brand spending on ads to drive customers to shop online, Nathanson wrote.

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

The firm said that online advertising in the United States will grow by 12.5% annually through 2025, down from the previous estimate of 18.5% annual growth.