How Have Recent Earnings Calls Impacted the Online Ad Space?

By Kirsteen Mackay


In this article

  • Loading...
  • Want to see what you should be buying? Check out our top picks.

As Big Tech reports earnings, online ad spend comes under scrutiny. This lucrative revenue stream faces an evolving landscape, and investors want insight.

Earnings season in tech has been a washout. This summer, shareholders are witnessing missed estimates across the board, and analysts are rushing to re-rate. Snap Inc (NYSE: SNAP), Alphabet Inc Class A (NASDAQ: GOOGL), Microsoft Corporation (NASDAQ: MSFT), Apple Inc (NASDAQ: AAPL), and Twitter Inc (NYSE: TWTR) are all in the firing line. And Wall Street is preparing for disappointing returns from Meta Platforms and Pinterest too. So, with a particular focus on the online advertising space, what’s next for the tech sector?

Within the online advertising landscape, multiple options are open to advertisers, and competition is fierce. The online advertising space brings in megabucks for these key players, but fast-changing consumer behavior and the temptation to make pots of cash opens the floodgates to smaller operators and start-ups with bespoke options and offerings. The big players must up their game to continue growing revenues and avoid losing out to newcomers.

That's not the only headwind facing the industry. Last year, Apple launched its app tracking transparency tool. This controversial move led around two-thirds of its consumers to opt-out of app tracking, dealing a death blow to advertisers. This has impacted advertiser spend and disrupted consumer targeting throughout the tech landscape.

After SNAP stock fell 40% in a few days, markets were braced for more misery with GOOGL and MSFT reporting.

GOOGL and MSFT Provide Hope 

Alphabet’s Q2 earnings per share (EPS) and revenue missed expectations, but Google search revenues remain strong.

Search and YouTube remain critical drivers of traffic and revenues for Alphabet, as was plain from its latest earnings call.

Sundar Pichai, Chief Executive Officer & Director, Alphabet, Inc., said:

services are particularly helpful to people and businesses during uncertain moments, whether it’s using Search or YouTube to find anything from anywhere, our highly efficient tools like Search ads that help businesses of all sizes reach customers

Within Google Services, Search delivered strong revenue growth in Q2, driven by performance in both travel and retail. Meanwhile, YouTube remains well positioned to deliver the reach, results, and relevance that advertisers need. According to a Google commissioned Nielsen meta-analysis of media mix models that measured YouTube CTV and TV across US consumer packaged goods, YouTube CTV effectiveness was 3.1 times greater than TV on average.

Altogether Google’s ad business shows resilience and looking ahead, Alphabet is focused on improving its advertising experiences by building simpler, more useful products for its partners. 

Meanwhile, Microsoft also missed on headline Q4 EPS and revenue. Foreign exchange rates were blamed, reducing Q4 revenue by $595m, and EPS by $0.04. The company’s Q1 guidance also missed analyst expectations but full-year projections show hope for double digit revenue growth ahead.

Nevertheless, Microsoft continues to lead B2B digital advertising, with customers choosing it for higher reach and ROI. Its recent high-profile deal with Netflix is a testament to this.

In Microsoft’s Q4 earnings call, CFO Amy Hood noted reductions in advertising spend impacted LinkedIn Marketing Solutions and search and news advertising by more than $100m. With ad-spend and PC demand weakness continuing, MSFT expects this will impact Windows OEM, Surface, LinkedIn, and Search and news advertising revenue in the coming quarter. However, its distinguished market position and varied revenue streams should drive a strong Q1 regarding revenue and share growth.

Nevertheless, it foresees a decline in its small and medium-sized business segment. The company is witnessing a slowdown in advertising spend. Search and news advertising revenue, excluding traffic acquisition costs, rose 18% and 21% in constant currency, missing expectations.

At the end of 2021, Microsoft acquired Xandr, a data-enabled tech platform powering a global marketplace for premium advertising. So far, only three weeks of Xandr revenues have been reflected in MSFT’s earnings reports, but even that was enough to impress. The company is hopeful it will provide a significant bump in the future.

Apple Holds the Cards for Now

When it come to earnings reports, all eyes are on Apple. Being a 2.4 trillion-dollar company, Apple has significant sway in overall stock market sentiment. Therefore, investors watch keenly for signs of a slowdown in purchases as confirmation of a recession in the works. As this could have a knock-on effect across the tech industry and stocks in general.

Apple reported its fiscal Q3, 2022 on July 28, and investors were delighted to hear iPhone sales hold up in the face of macroeconomic uncertainty.

During Apple’s Q2 fiscal 2022, its services net sales increased Y/Y due primarily to higher net sales from advertising, the App Store and cloud services. Investors were looking for this to continue in Q3.

It’s down -1.1% Q/Q from $19.82bn in Q2 to $19.6bn in Q3, but up 12% Y/Y, which is a June quarter record and in line with company expectations.

Unlike Alphabet, Apple’s ad revenue is a tiny part of its business and mostly comes from ads in the App Store. Apple also generates a small amount of revenue from display ads in its Apple News and Stocks apps. 

Despite this, Apple holds significant sway over the entire tech industry due to its ownership of the popular Apple hardware and App Store. In the future, this could bring it greater revenue opportunities. 

Bernstein analyst Toni Sacconaghi estimates that Apple had ad revenue of around $4bn in the calendar year 2021, up from approximately $300m in 2017. Sacconaghi also suggests Apple could build an audience network business to sell ad space on iOS apps. Apple has significant user insight due to its product data collection on signups and sales. This puts it in an advantageous position and could worry its big tech competitors.

Like Snap, Twitter underperformed in Q2, with a drop in advertising revenues. It also missed analyst expectations on user growth. Twitter blamed ad industry headwinds and “uncertainty” tied to Elon Musk’s bid to buy the company.

The online ad platform space is affected by changing consumer behavior and a reduction in available cash. According to Global Web Index, consumers spend 72% of their media time on digital channels. But where their attention is focused at any given time is becoming harder to track.

Inflation and the threat of recession are leading consumers to tighten their belts, and rising costs are eroding company margins. This means ad spend is changing because companies want to ensure they are spending money to reach their target audience in the right place. 

Snap Inc (NYSE: SNAP) is an American camera and social media company founded on 16 September 2011. Along with the 40% drop sending SNAP stock below its IPO price of $17, it suffered 14 downgrades after its Q2 earnings miss. The company developed tech products and services, namely Snapchat, Spectacles, and Bitmoji. It was founded in California by Evan Spiegel, Bobby Murphy, and Reggie Brown.

Alphabet Inc Class A (NASDAQ: GOOGL) is an American multinational technology conglomerate headquartered in Mountain View, California. It was created through a restructuring of Google in October 2015, and became the parent company of Google and several former Google subsidiaries. Alphabet wants to make it easier to create effective ads for any Google Ads campaign, beginning with the organization of images and videos.

Microsoft Corporation (NASDAQ: MSFT) is an American multinational technology company known for its computer software, consumer electronics, personal computers, and related services. It owns the Windows operating system, LinkedIn, Xbox and much more. Microsoft's CEO sees see real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and emerge stronger.

Apple Inc (NASDAQ: AAPL) is an American multinational technology company specializing in highly coveted consumer electronics, software, and online services. Apple is headquartered in Cupertino, California, United States.

Twitter Inc (NYSE: TWTR) is an American communications company based in San Francisco, California. The company operates the microblogging and social networking service Twitter. It previously operated the Vine short video app and Periscope live streaming service.

Digital Advertising Delivers Long-term ROI

According to new research by Nielsen, Nepa and GfK, businesses measuring advertising by its short-term outcomes undervalue its impact. Results of the study revealed that digital advertising and Meta Platforms Inc (NASDAQ: META) apps are effective for building long-term brand return on investment (ROI). Therefore, marketers who understand the benefits of long-term brand-building on digital channels are more likely to capitalize on the digital-first landscape. Meta changed its ticker symbol from FB to META on June 9, 2022.

Pinterest Inc (NYSE: PINS) is another social media platform to fall from grace. The PINS share price is down 52% year-to-date and a new CEO has been appointed. Nevertheless, the economic environment is challenging and user numbers in the US have been declining. Activist investor Elliott recently disclosed a significant stake in PINS stock, giving rise to a momentary bounce as investors cheered.

Pinterest makes money from advertising which is reported as the global average revenue per user (ARPU). Pinterest will release financial results and a letter to shareholders for Q2, 2022, on Monday, August 1, 2022, after market close. For Q2, FactSet analysts expect revenue of $664.73 and adjusted EPS of $0.18.

Amazon (NASDAQ: AMZN) is another tech giant less known for its advertising revenues. Yet, Advertising Services contributed $8.75bn to net sales in Q2.

Brian T. Olsavsky, CFO & Senior VP,, Inc., said:

Right now, we still see strong advertising growth... I think our advantage is that we have highly efficient advertising. People are advertising at the point where customers have their credit cards out and are ready to make a purchase.

The majority of the advertising revenue is in North America. But having said that, we are making great strides in international as well, and we're also expanding our array of advertising products from our consumer websites to video opportunities, Twitch and others.

Olsavsky also mentioned that Amazon’s advertising is very measurable. Therefore, if companies are looking to potentially streamline, optimize their advertising spend, or build their brand, Amazon’s advertising offerings are in a very competitive position.

Furthermore, Amazon sellers and vendors are also some of its larger advertising customers, thereby strengthening the partnership.

In Q2, Amazon's revenue growth beat expectations amid continued strength in e-commerce and AWS.

Meta Platforms Inc (NASDAQ: META), formerly Facebook, Inc. and TheFacebook, Inc., is an American multinational technology conglomerate based in Menlo Park, California. The company owns Facebook, Instagram, and WhatsApp, among other products and services. New independent research by Nielsen, Nepa and GfK and commissioned by Meta addresses this question and shows that digital advertising and Meta apps contribute to long-term ROI.

Pinterest Inc (NYSE: PINS) operates a pinboard-style photo-sharing website. It allows users to create and manage theme-based image collections such as events, interests, and hobbies. In June, Pinterest completed the acquisition of THE YES, an AI-powered shopping platform for fashion that enables users to shop a personalized feed based on the user's active input on brand, style, and size.

Amazon (NASDAQ: AMZN) saw its free cash flow drop 293% Y/Y in Q2. And Operating cash flow decreased 40% to $35.6bn Y/Y. On July 12 and July 13, Prime members worldwide purchased more than 100,000 items per minute, and some of the best-selling categories were Amazon Devices, Consumer Electronics, and Home. Amazon Devices had a record-breaking Prime Day, selling more devices than any other Prime Day event.


In this article:

Quarterly Earnings
Information Technology

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of, has not been paid for the production of this piece by the company or companies mentioned above.

Sign up for VTM Updates

Form submitted successfully!

VTM Exclusive Reports

Crypto Corner

Learn your NFTs from your BTCs