Alphabet Video Channel’s 2% drop in ad sales could be a harbinger for big networks and streamers
Tucked inside the technology was Alphabet’s quarterly earnings such that its YouTube video platform suffered a 2% drop in ad sales — the first drop for the unit since the owner of Google reported the platform’s revenue in 2019. began. It is a precursor to cable and broadcast. Networks reporting quarterly results in the next few weeks, as well as streamers hoping to cash in on advertising dollars as well as subscription fees.
Think of it this way: People with less attention span are worth slightly less in advertising dollars than they did a year ago. These viewers are optimized for viewing content that rarely goes beyond a minute. Now, what does this mean for the media dinosaurs of broadcast and cable that bank on big money spends on three commercials every 15 minutes? And what does this mean for streamers like Netflix and Disney+ who are preparing to launch cheaper ad-based alternatives in hopes of earning subscription fees as well as income from ads?
It’s not great. That means the attention of “The Island Boys” singing in the hot tub is sinking. And, if short-form videos are losing users’ attention, advertising dollars for hit series like “Law & Order: Special Victims Unit” will follow suit.
Senior analyst Jesse Cohen said, “Despite being viewed as one of the most underserved companies in the advertising sector compared to peers, Google’s poor quarter is the latest sign that deteriorating infrastructure and a tough macroeconomic environment are driving advertisers to spend. prompting them to cut.” Feather Investing.com,
Matt Sotebir, chief strategy officer at Digital Remedy, said advertisers are in a bind as consumer spending confidence has eroded amid rising inflation and interest rates.
“What we’re seeing with YouTube ad revenue is indicative of a larger trend around tightening media budgets,” he said. “Also, we are seeing an increase in advertisers willing to spend more directly to reduce funnel results such as online sales.”
Overall, YouTube revenue — which came in at $7.07 billion, well below analysts’ estimates of $7.42 billion — is just a drop in the bucket for the tech giant. The broader company posted a decline of 41% from the year-ago period to nearly $69.1 billion — well under the $70.6 billion forecast for the period.
Still, Alphabet’s chief financial officer Ruth Porat didn’t mince words: “The decline in revenue primarily reflects further deficiencies in advertising.” The digital advertising market has been hit by a slowdown in spending over the past few quarters, as companies scale back their budgets amid rising inflation and interest rates.
Porat put the blame squarely on the financial services firm that was advertising like gangbusters during the pandemic, taking advantage of a captive audience for “five ways to keep your financial house in order”. Think of the mortgage rate ads that pervaded the world before the Federal Reserve called them higher, easier loan terms, and the explosion of crypto scams.
And Alphabet claimed that YouTube’s short programming and CTV placement had the best ad-to-dollar ratio, keeping it competitive amid heavy competition from rivals like TikTok.
Snap said the same thing last week. The social media giant posted revenue of $1.13 billion, missing estimates. Even Microsoft, which isn’t the most ad savvy of the bunch, came in at $50.12 billion in revenue projects under way.
Snap CEO Evan Spiegel acknowledged the challenges of navigating “this difficult macro environment that has affected our advertising business over the past few quarters.” As noted by media industry analyst Richard Greenfield, this “wasn’t a good earnings start for anyone in the broadcast or cable TV network business” and “the pullback in Q4 as fears of a slowdown in brand advertising spend build.” “Shows.
Broadcast and cable networks are still huge earnings drivers for Hollywood studios, earning billions of dollars a year from monthly subscription fees from pay TV providers. Those providers, such as Comcast or Charter Communications, could be squeezed financially if companies start pulling back even more on ad spend as they prepare for a recession.
Even streamers can feel the effects of the lack of advertising, especially when Netflix launched an ad-supported tier next week (for $6.99 per month) and Disney+ launched its own commercial in December. -Discontinue service (for $7.99 per month) follows.
