A growing digital ad market is benefiting tech, from Meta to Reddit

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A growing digital ad market is benefiting tech, from Meta to

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Jaque Silva | Nurphoto | Getty Images

The digital advertising market is doing so well that even

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is getting a cut of the spoils.

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on Wednesday reported fourth-quarter revenue of $428 million, which was up 71% from the previous year and represents the fastest growth rate for any quarter since 2022. Although

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’s shares tumbled on weaker-than-expected user numbers, the company’s growing sales indicate a particularly healthy digital ad market, said Jeremy Goldman, a senior director at Emarketer.

Investors typically look to the financial performance of tech giants like Meta, Alphabet and

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for a view of the ad market’s overall health, Goldman said. That

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’s sales grew significantly alongside the ******* players shows that advertisers feel optimistic enough to “diversify to a platform that’s more nascent, like

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, and say ‘We’re willing to throw some dollars at this thing that don’t really understand,'” Goldman said.

Media and advertising executives told CNBC in December that they were optimistic about the market and said that ad spending increased in the fourth quarter. That sentiment seemed to be reflected by online ad tech companies’ latest quarterly earnings reports, said Gil Luria, head of tech research at investment banking firm D.A. Davidson. He added that “animal spirits are high” following the U.S. presidential election.

For its fourth quarter results, Meta said sales were $48.39 billion, up 21% from the prior year.

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said its fiscal second-quarter search and news advertising revenue soared 21% year over year, although it doesn’t provide specific sales numbers.

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said its online advertising business grew 18% year-over-year to $17.29 billion in the fourth-quarter earnings, and for its fourth-quarter results, Alphabet said its

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advertising sales grew 11% year over year to $72.46 billion while

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’s ad revenue rose 14% to $10.47 billion.

“Advertisers feel like consumers are susceptible to advertising and are investing in that,” Luria said.

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Luria noted that while

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is the dominant online advertising business, it’s losing some market share as its core search engine is increasingly challenged by other companies investing in artificial intelligence and related services like ChatGPT.

“They are the biggest digital advertising platform by quite a bit of margin, but a lot of that is based on search, and their search franchise is continuously being eroded,” Luria said. “It’s being eroded by

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, being eroded by Meta, being eroded by the AI players.”

Fortunately for Alphabet,

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is still booming, Luria said.

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is “becoming such an important media destination that the momentum there is greater than what you would just see from the advertising growth,” said Luria. He noted that some creators have migrated to

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amid the TikTok ban.

The uncertainty over TikTok’s future in the U.S. has yet to impact advertisers who are still running campaigns on the ByteDance-owned platform, said Kate Scott-Dawkins, the global president of business intelligence of media investment firm GroupM.

If TikTok eventually does get banned in the U.S., Scott-Dawkins said she expects Meta and Alphabet would inherit much of those ad dollars but noted Snap, Pinterest and others could also pick up scraps.

Snap and Pinterest also reported their fourth quarter results last week. Pinterest said its sales jumped 18% year over year to $1.15 billion while Snap reported $1.56 billion in revenue for the *******, marking a 14% increase from the previous year.

But not every digital advertising player had good results for the quarter.

Despite ad tech company The Trade Desk on Wednesday

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a 22% year over year increase in fourth-quarter sales to $741 million, that figure came in below Wall Street estimates, which sent shares tanking. CEO Jeff Green attributed the miss to “a series of small execution missteps” during an analyst

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.

Although companies are pumping money into digital ad platforms, there’s a chance that high inflation, tariffs and weaker economies outside of the U.S. put pressure on the ad market, experts said.

High tariffs and new trade policies could result in ********-linked retailers like Temu and Shien slowing down their massive digital advertising campaigns with giants like Meta and Alphabet, Luria said. But even if those ********-linked retailers curb spending, it’s likely other advertisers take their place, Luria said.

It’s possible that AI startups like OpenAI, Anthropic and others could eventually become major ad spenders, Scott-Dawkins said. It’d be similar to how older tech companies like Airbnb and TikTok once grew their users via

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and

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. OpenAI debuted a Super Bowl commercial last week, which could be an indicator of more ad spending to come, she said.

Watch: I’d buy

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over Meta, says Hightower’s Stephanie Link

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#growing #digital #market #benefiting #tech #Meta #

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