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By Samriddhi A and Aditya Soni
Oct 25 (Reuters) – A surge in the advertising businesses of Google, Meta and Snap suggested that growing acceptance of artificial intelligence is attracting marketers to digital platforms even in an uncertain economy.
All three companies this week beat quarterly revenue expectations and each posted positive metrics for their advertising businesses.
“AI is helping advertisers find more people and their ideal audiences at the lowest cost possible,” said Philip Schindler, chief business officer of Alphabet’s Google.
The company is doubling down on technology with tools like Performance Max, which uses AI to decide how marketing budget should be distributed across Google’s ad network.
Schindler said the retail sector was particularly strong during the July-September period. He said the company has “begun to prepare retailers for the long holiday season” to help them deliver deals to consumers who care about price and convenience.
Alphabet reported a 9.5% rise in advertising revenue in the July-September quarter, ahead of Wall Street estimates. Its YouTube advertising business saw a growth of 12%.
Meta, which said its ads seen in the quarter increased 31% from a year earlier, signaled plans to invest heavily in AI next year. The company’s average cost per ad declined 6%, but the pace of decline was the slowest in seven quarters.
The Facebook and Instagram owner has leaned heavily on AI-powered marketing planning and ad measurement features in recent years to fuel its growth, spurred by Apple-led privacy changes that barred users from using personal data to target ads. Its ability to use data has been reduced.
Now it is bringing tools that use generative AI to create different forms of ad campaigns.
“Facebook/Instagram’s tools for creating (marketing) campaigns are much faster and easier to use than smaller rivals, including Snap,” which could give Meta an edge, RBC analysts said.
Snap’s efforts to revamp its ad-targeting tools with technology also paid off, as average revenue per user increased in the third quarter.
Analysts said the results show that the advertising market remains bullish due to spending by retail companies. He pointed to Google and Meta as the biggest potential beneficiaries.
“We expect larger platforms like Meta and Google to lead wallet share growth in this ad spend recovery, at least initially,” Evercore ISI analysts said.
Companies are considered more resilient to uncertainty arising from geopolitical turmoil such as the conflict in the Middle East because their broader reach helps attract a steady stream of advertisers.
Still, Meta Chief Financial Officer Susan Lee said Wednesday that the company had detected “softness” in ad spending early in the fourth quarter that appears to be related to the Israel-Gaza conflict.
Last month, media research and investment firm Magna raised its forecast for US ad spending growth for calendar 2023 to 5.2% from 4.2%. It expects digital ad sales to grow 9.6% in the period. (Reporting by Samridhi Arunasalam, Aditya Soni and Yuvraj Malik in Bengaluru and Katie Paul in New York; Editing by Sriraj Kalluvila, Sayantani Ghosh and Muralikumar Anantharaman)