Eoneren
The digital ad market is looking healthier, at least for Meta Platforms (NASDAQ:META) and Google (NASDAQ:GOOG) (GOOGL).
Deutsche Bank and Bank of America both noted a better digital ad market for the two tech giants, while Snap (NYSE:SNAP) may take a while to see benefits, according to Deutsche Bank.
Ad checks indicate that Google (GOOG) (GOOGL) Search has remained resistant as YouTube shows signs of accelerating momentum, Deutsche said.
Meta (META), parent company to Facebook and Instagram, is benefiting from an improving digital ad market, ramping Reels monetization and improving artificial intelligence driven ad measurement, according to Bank of America.
The digital ad market is thriving amid a complicated macroeconomic outlook in the U.S. with persistent inflation, elevated consumer spending and interest rates that may continue to go higher.
Despite its positivity on the digital ad market for Meta (META), Bank of America lowered estimates given recent foreign exchange changes, with third quarter revenue expected at $33.5B, up 21% year-over-year and in-line with Street estimates.
The bank forecast earnings at $3.79, above the $3.60 average estimate. For the third quarter, which Meta (META) will report on October 25, BofA said to look for a higher-than-expected fourth quarter growth outlook, traction for Reels monetization and positive commentary on AI-driven benefits for engagement and ad spending.
Deutsche Bank said Meta (META) has “meaningfully rationalized” its cost structure and improved monetization at Reels and Messaging while efficiency gains are driving incremental share of ad budgets.
At Google (GOOG) (GOOGL), meanwhile, advertisers continue to prefer Google Search over ChatGPT. Google (GOOG) (GOOGL) parent Alphabet is set to report earnings on October 24.
YouTube is also showing signs of accelerating momentum in the third quarter and into the fourth as brand advertising is “flashing signs of a recovery,” Deutsche said.
Snap (SNAP), which also reports earnings on October 24, is the odd duck out. The stock has remained under pressure with investors losing confidence in a quick recovery in ad spending on the platform.
Second-quarter results were disappointing, driving shares lower. A full revamp of the ad tech stack will require approximately three to four quarters, which would push expectations for improved results to the first quarter of 2024, the bank said.
Shares of Meta (META) are up 135% in 2023, while Google (GOOG) (GOOGL) is up 55% and Snap (SNAP) is down 11%.