Internet giants see Covid fortunes reversed as digital ad money dries up

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American heavyweights that were once considered unstoppable are, for the first time in years, looking a little washed up.

We’re not talking about Tom Brady and Aaron Rodgers. This is about America’s internet giants, which are slumping hard in this era of higher interest rates, lower advertising budgets, and widespread economic uncertainty.

Yesterday, Meta became the latest Big Tech company to post rough financial results for the last quarter. It recorded its second straight quarter of declining revenue and provided a gloomy outlook for Q4.

Come to think of it, maybe Meta shouldn’t even be considered “Big Tech” anymore. Since its share price peaked in September 2021, the company lost nearly two-thirds of its value…before diving another 12% in after-hours trading yesterday.

What went wrong? Younger people are fleeing Facebook, and investors aren’t confident CEO Mark Zuckerberg can reinvent the company as a metaverse platform. “Meta has drifted into the land of excess—too many people, too many ideas, too little urgency,” a prominent shareholder wrote this week in a scathing letter. Meta’s metaverse unit, Reality Labs, has lost $9.4 billion so far this year.

While Meta may be the poster child for Big Tech’s struggles, it’s not the only company that needs a checkup.

  • Google parent Alphabet posted its slowest revenue growth since 2013 (outside of one early pandemic quarter), and YouTube ad sales actually fell in Q3. It’s “a tough time in the ad market,” CEO Sundar Pichai acknowledged. Sure is—yesterday, Alphabet shares had their worst day since March 2020 .
  • Even cool-as-a-cucumber Microsoft had its worst day since March 2020 after giving a disappointing forecast. Its push to dominate the metaverse is also faltering, per the WSJ.

big picture: Tech giants scored record profits during Covid, when interest rates were near zero, stimmies were flowing, and everyone was stuck inside with only the internet to entertain themselves. But now that those days are over, we’re going to find out which companies can sail without the wind at their back.—NF

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