LONDON: Wall Street is bracing for the slowest global revenue growth in the history of the social media sector, as intensifying competition from TikTok and Apple in advertising threaten to compound economic woes in the second quarter.
The dour expectations come after a blowout 2021, when social media ad sales in the United States grew 36 percent to reach $58 billion as brands increased marketing budgets to recover from the pandemic and reach customers online.
But social media platforms have since warned investors and employees that the tide is turning as inflation lingers around 40-year highs, an environment where brands spend less on advertising.
Meta Platforms Chief Executive Mark Zuckerberg told employees last month the company was slashing hiring plans and that “this might be one of the worst downturns that we’ve seen in recent history.”
Snap Inc, which owns Snapchat and is due to report earnings after the close, earlier said it expected to miss its own quarterly revenue forecast due to deteriorating economic conditions.
Global social media ad sales are now expected to grow by 11 percent, the slowest pace on record, according to media intelligence firm MAGNA, which downgraded the growth forecast from 18 percent.
Analysts had expected some degree of slowing growth after 2021. However, growing competition from viral short-form video app TikTok and Apple has created a “perfect storm” and “investors are rightfully wary” about digital ad growth this year, wrote Barclays analysts in a research note this month.
Apple had already upended the digital ad industry when it introduced new iPhone privacy controls last year that hurt the ability for companies like Meta and Snap to target and measure ads on their apps.
Apple’s own advertising business, which mostly consists of developers paying to promote their app on the App Store, is expected to grow 36 percent this year to $6.9 billion, Barclays wrote, adding that Apple and TikTok together will take 34 percent of every new ad dollar that is spent outside China this year.
Lior Eldan, chief operating officer of mobile app marketing agency Moburst, which has worked with brands like Uber and Reddit, said clients are now spending about two to three times more on Apple ads, in part because the effectiveness of ads on other platforms has been degraded by Apple’s privacy changes.
“We’ve seen dramatic increases in budgets on Apple search ads following the privacy changes,” he said.
While still much smaller than behemoths like Facebook and YouTube, TikTok is poised to grow over 200 percent to become a $12 billion business, Barclays wrote.
TikTok remains important for many clients’ advertising strategies, said Yvonne Williams, vice president of media at ad agency Code3, which has worked with brands like Gap and Dior.
Alphabet’s Google, which reports second-quarter earnings on Tuesday, is the company most likely to be shielded from negative effects, because Google Search is “mission critical” for many advertisers, analysts from RBC Capital Markets said in a note on Tuesday.
Meta, Snap and Pinterest are more exposed to the Apple privacy changes and competition from TikTok, Barclays said.
Social media revenue growth expected to slow as TikTok, Apple compete
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Social media revenue growth expected to slow as TikTok, Apple compete
- Global social media ad sales are now expected to grow by 11 percent, the slowest pace on record, according to media intelligence firm MAGNA, which downgraded the growth forecast from 18 percent.
Saudi Arabia ‘ideal partner’ in shaping next wave of intelligent age, communication minister tells WEF
- Abdullah Al-Swaha said aim was to “help the world achieve the next $100 trillion by energizing the intelligence age”
DAVOS: Saudi Arabia has accelerated efforts in “energizing the intelligent age,” making the Kingdom the world’s ideal partner in shaping the next wave of the technological age, said the minister of communication and information technology.
Speaking during a panel discussion at the World Economic Forum in Davos, Abdullah Al-Swaha said the aim was to “help the world achieve the next $100 trillion by energizing the intelligence age.”
He said the Kingdom was expanding global partnerships for the benefit of humanity and highlighted both local and international achievements.
“We believe the more prosperous the Kingdom, the Middle East, is, the more prosperous the world is. And it is not a surprise that we fuel 50 percent of the digital economy in the kingdom or the region,” he told the audience. He added the Kingdom fueled three times the tech force of its neighbors and, as a result, 50 percent of venture capital funding.
Al-Swaha said Saudi Arabia was focused both on artificial intelligence acceleration and adoption. At home, he said, the Kingdom was doubling the use of agentic AI in the public and private sector to increase worker productivity tenfold. He also cited the world’s first fully robotic heart transplant, which was conducted in Saudi Arabia.
“If we double down on talent, technology, and build trust with partners, we can achieve success,” he said. “And we are following the same blueprint for the intelligence age.”
He said the Kingdom aimed to be a “testbed” for innovators and investors. Rapid technological adoption and investment have boosted Saudi Arabia’s non-oil economy, with non-oil activities accounting for 56 percent of GDP and surpassing $1.2 trillion in 2025, ahead of the Vision 2030 target.
In terms of adoption, Al-Swaha said the Kingdom had introduced the Arabic-language AI model, Allam, to be adopted across Adobe product series. It has also partnered with Qualcomm to bring the first hybrid AI laptop and endpoints to the world.
“These are true testimonies that the kingdom is not going local or regional; we are going global,” he said.
