Advertisers Hit the Brakes Amid Economic Uncertainty

When Google’s parent company Alphabet reported a slowdown in advertising sales in its latest quarterly earnings report on Tuesday, it stoked fears of a broader advertising downturn. After all, Google is by far the largest media owner in the world, with more than $200 billion in annual ad sales. And if a dominant player like that sees sales slow down significantly, that doesn’t bode well for the rest of the industry. In the three months ended September 30, Google’s advertising sales growth slowed to just 3 percent year-over-year, the lowest it’s been since 2009 apart from Q2 2020, when Covid stifled ad spending around the world.

As the following chart shows, Google’s advertising slowdown is in fact part of a broader trend, as advertisers cut budgets amid recession fears and a sea of uncertainty. According to Standard Media Index’s September 2022 Core Data report, ad spending in the U.S. dropped by 5 percent in September, continuing a four-month decline. Total ad spending across all media was down 6 percent in the third quarter, as both digital and television ad spending growth evaporated over the first nine months of the year.

With recession fears looming large over the U.S. economy, advertising businesses should batten down the hatches, as ad spending has historically declined disproportionately amid economic downturns.