“Alphabet’s impressive performance and Meta’s strategic signaling are clear indicators that the advertising market is bouncing back with remarkable strength.”
The advertising businesses of Google, Meta, and Snap have shown signs of rebounding, indicating that the adoption of artificial intelligence (AI) is attracting marketers to digital platforms. Despite an uncertain economy, all three companies exceeded quarterly revenue expectations and reported positive metrics for their ad businesses.
According to Philipp Schindler, chief business officer at Google, AI is helping advertisers reach as many people as possible and target their ideal audience at the lowest possible cost. Google has been investing in AI technology, such as Performance Max, which uses AI to allocate marketing budgets across its ad network. Schindler noted that the retail segment performed particularly well during the July-September period, as the company prepared retailers for an extended holiday season.
Alphabet, Google’s parent company, reported a 9.5% increase in ad revenue in the third quarter, surpassing Wall Street estimates. Its YouTube ads business also experienced a 12% growth. Meta, the company behind Facebook and Instagram, saw a 31% increase in ad views compared to the previous year. Although its average price per ad declined, the rate of decline was the slowest in seven quarters. Meta plans to heavily invest in AI next year and is rolling out tools that use generative AI to create different variations of ad campaigns.
Snap, the owner of Snapchat, also benefited from its efforts to enhance its ad-targeting tools with technology. Average revenue per user increased in the third quarter. Analysts believe that the ad market rebound is on track, driven by spending from retail companies. Google and Meta are considered the biggest potential beneficiaries. Evercore ISI analysts expect these larger platforms to lead the growth of ad spending, especially in the initial stages of the recovery.
Despite the positive outlook, Meta’s Chief Financial Officer, Susan Li, mentioned a “softness” in ad spending at the beginning of the fourth quarter, potentially related to the Israel-Gaza conflict. However, the wider reach of these companies makes them more resilient to uncertainty caused by geopolitical turmoil.
Overall, the advertising industry’s adoption of AI is proving beneficial for Google, Meta, and Snap. As the market rebounds, these companies are expected to attract a steady stream of advertisers, with Google and Meta leading the way.