Save time by listening to our audio articles as you multitaskThe contrast with 2022 is stark. On July 21st Snap reported that its sales grew by 13%, year on year, in the second quarter, its most anaemic ever. In a letter to investors, the firm confessed that so far this quarter revenue was “approximately flat”. The market was spooked, and the company’s share price fell by almost 40%.
Upstart challengers like Snap are the most exposed. When marketing budgets get trimmed, advertisers tend to stick to what they know, says Mark Shmulik of Bernstein, a broker. And they know Google search much better than they do Snap’s experiments with augmented reality. The big firms also boast larger and more diverse sets of customers; Meta serves 10m advertisers globally, compared with Snap’s estimated 1m or less. That insulates them somewhat from softening demand.
Both Alphabet and Meta are also facing fiercer competition. TikTok, a Chinese-owned short-video platform beloved of Western teenagers, is taking eyeballs from American social media, and ad revenue with them. Perhaps more concerning, previously ad-incurious tech titans are also getting in on the action. In the past couple of years Amazon has built the world’s fourth-biggest online-ad business. Apple has a small but growing ad operation.