Affected by rising inflation, economic turmoil, conflict between Russia and Ukraine and supply chain crisis, online advertising giants have been having a hard time lately. Alphabet Inc-CL C's advertising revenue growth slowed significantly in the first quarter and was less than expected, while Facebook Inc, its biggest competitor, fared even worse, with parent Meta shares down about 46 per cent so far this year.

Alphabet Inc-CL C's advertising revenue fell short of expectations.

Alphabet Inc-CL C's parent company Alphabet reported the slowest year-on-year growth in revenue and 8.3 per cent year-on-year net profit in the first quarter of this year after US stocks opened on Tuesday, April 26th.

As mentioned in the previous article on wall street, the financial report showed that in the main business of Alphabet, the revenue of the advertising business increased by 22.3% compared with the same period last year, which was significantly slower than the previous quarter. Of this total, YouTube's advertising revenue was nearly $6.9 billion, down about 8 per cent from analysts' expectations of $7.4 billion and well below expectations, and 14 per cent year-on-year growth slowed sharply from 25 per cent in the previous quarter.

The Wall Street Journal analysis saidThis may be due to Apple Inc's new privacy rules on iPhone advertising positioning restrictions, as well as peer competition from TikTok to YouTube, and the downturn in global online advertising has hit YouTube harder than expected.

Due to rising inflation, economic turmoil, Russia-Ukraine conflict and supply chain crisis, these factors have had a negative impact on the online advertising business.

Ruth Porat, chief financial officer of Alphabet, also said that the lower-than-expected performance of the advertising business was due to the impact of reduced advertising spending in the European market after the conflict between Russia and Ukraine. "there is a lot of uncertainty in the current macro environment."

Online advertising giants face difficulties

The Wall Street Journal said that looking ahead, the online advertising business will usher in a downward trend. It believes that the performance of online advertising giants may continue to be dragged down by macro-environmental uncertainty.

Data analysis company FactSet expects advertising revenue from the six advertising giants Alphabet Inc-CL C, Facebook Inc, Amazon.Com Inc, Twitter, Snap Inc and Pinterest to grow by 19% in the first quarter of this year, compared with 28% in the fourth quarter of last year and 40% in the first quarter of last year.

FactSet also expects advertising revenue from Meta Platforms, Facebook Inc's parent company, to grow by just 8 per cent to about $27.5 billion in the first quarter. So far, 18 analysts have downgraded their advertising revenue forecasts for Meta, FactSet said.

Previously, Meta's advertising revenue growth had slowed sharply by 12% year-on-year in the fourth quarter of last year, causing concern among investors. Brad Erickson, an analyst at RBC Capital, an asset management company, predicted in an April 13 report that:

Meta will once again usher in a difficult quarter, we found that Meta's advertising positioning algorithm and performance has not been significantly improved.

Shares in Meta, Alphabet Inc-CL C's parent company, have fallen about 46 per cent so far this year, with Facebook Inc being Alphabet Inc-CL C's biggest competitor in advertising.

It is worth mentioning that Alphabet shares fell more than 2.5 per cent in after-hours trading after the latest results. As of Tuesday, Alphabet's shares have fallen 18% so far this year.