Google revenue

Big tech ad revenue growth will decline as pandemic bubble bursts

After unprecedented revenue growth last year, digital platforms such as Alphabet Inc., Meta Platforms Inc., Snap Inc. and Twitter Inc. are now facing a sobering reality as advertising trends related to the pandemic are dissipating, according to an analyst report Thursday.

Research firm MoffettNathanson cut its 2025 revenue estimates for each of the four companies by double-digit percentages.

U.S. digital ad spend jumped 38% in 2021 from a year earlier. Alphabet, the world’s largest digital advertising platform, posted record revenue of $257 billion that year.

As companies warned of inflationary pressure, war in Ukraine and the end of a COVID-induced surge in advertising, the report estimates for the first time the potential impact on revenues at course of the next few years.

“After years of hyperoptimism, we are genuinely concerned about the longer-term growth of digital advertising,” MoffettNathanson analyst Michael Nathanson wrote in the report.

Advertising market growth last year was driven in part by an ‘unprecedented spike’ in profitability as companies saved money on office space and expansion and had more to spend in marketing, as well as brands that spend on advertising to entice customers to buy online,” Nathanson wrote.

But e-commerce as a percentage of retail sales has returned to pre-pandemic levels, and business spending is expected to rise as workers return to the office, the report said.

The company said it now expects online advertising in the United States to grow 12.5% ​​per year through 2025, down from the previous estimate of 18.5% by annual growth.

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