Facebook Reports Slowing First Quarter Ad Growth This Year, Inflation And Ukraine War Causes

Facebook could lose its grip on the global ad market. (photo: doc. pixabay)

JAKARTA - Facebook owner Meta Platforms Inc. is expected to report its slowest quarterly ad revenue growth in a decade on Wednesday. The slowdown in advertising growth was due to businesses pulling back on their advertising spending due to soaring inflation worldwide and the war in Ukraine.

Global advertising and marketing budgets will be further squeezed if the Ukraine crisis continues in the coming months. While some analysts expect that Meta will also issue a “warm” forecast for the current quarter.

According to Refinitiv data, Meta's ad revenue is expected to grow only 8.7% in the first quarter. This figure is said to be the latest since 2012, when the company started going public.

Wall Street analysts also said Facebook could lose its grip on the global ad market, even as digital ad spending has now outpaced traditional advertising methods.

"Meta predictions for a slowdown can be read as a reduction in the potential of the Facebook brand as well," said Hargreaves Lansdown analyst Sophie Lund-Yates.

Meta has lost nearly half its market value since February 2, when it reported a decline in Facebook's daily active users for the first time. They also forecast a dismal quarter for their business

While Alphabet Inc, parent of Google, also signaled on Tuesday, April 26 that the war in Ukraine has also slowed advertising sales on YouTube. Rival Snap Inc also warned that inflation, labor shortages and other economic challenges could squeeze ad revenue.

This is not an ideal time for tech companies that depend on advertising revenue to increase their revenue. They're also grappling with policy changes in Apple's App Store and increasing competition for ads from companies like TikTok.

"The cost of acquiring customers on digital channels like Facebook has increased while the ability to target customers has decreased," said Mitchell Olsen, assistant professor of marketing at the University of Notre Dame.

According to Olsen, as a result, many brand managers are reducing their exposure to Facebook and allocating their advertising funds across multiple platforms.