Digital ad market shows 'signs of life' but economy clouds 2023 outlook

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(Reuters) - When Snap Inc kicks off the third-quarter earnings season for tech and social media companies on Thursday, investors are expecting modest revenue growth across most of the sector as results will be compared with a difficult 2021 when Apple Inc privacy changes began to upend the advertising industry.

But a possible recession next year makes forecasting 2023 financials a guess at best, say some analysts, while investors are wary of reading too deeply into"signs of life" like ad spending around the fall shopping season as indicators of future performance.

Tech companies have taken steps to prepare for the worst through cost cuts, halting hiring, reining in employee perks and focusing on profitable projects. That has helped reassure Wall Street in the short term, some analysts said. The company announced in August that it would lay off 20 per cent of its staff and cut money-losing projects, blaming a deteriorating economy.

Wall Street is expecting Alphabet to report the highest growth of the Big Tech companies with an increase of 7.5 per cent in ad revenue compared with last year.Meta Platforms Inc has been hurt by those changes, on the other hand, and investors will be scrutinizing the company's results for evidence of improving user engagement with Facebook and Instagram and more brands buying adds on newer features like TikTok competitor Reels, said analysts.

"The company now known as Meta is a far cry from Facebook one year ago," said Debra Williamson, principal analyst at research firm Insider Intelligence."After a dismal earnings report in Q2, we aren't expecting Q3 to be any better. It's very possible it will be much worse."

 

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