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Social media revenue growth set to slow as TikTok and Apple compete

July 21 (Reuters) – Wall Street braces for the slowest global revenue growth in the history of the social media industry as intensified competition from TikTok and Apple in advertising threatens to worsen economic difficulties in the second quarter.

The grim expectations come after an explosion in 2021, when US social media ad sales rose 36% to $58 billion as brands ramped up marketing budgets to recover from the pandemic and reach online customers.

But social media platforms have since warned investors and employees that the tide is turning as inflation persists around its 40-year high, an environment where brands are spending less on advertising.

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Meta Platforms (META.O) chief executive Mark Zuckerberg told employees last month that the company was scaling back hiring plans and “this could be one of the worst downturns we’ve seen in the industry.” ‘recent history’. Read more

Snap Inc (SNAP.N), which owns Snapchat and is due to report earnings after the close, said earlier that it expected to miss its own quarterly revenue forecast due to deteriorating economic conditions. Read more

Global social media ad sales are now expected to grow 11%, the slowest pace on record, according to media intelligence firm MAGNA, which lowered growth forecasts by 18%.

Analysts had expected some slowdown in growth after 2021. However, growing competition from viral short video app TikTok and Apple has created a “perfect storm” and “investors are rightly wary” of growth digital advertising this year, Barclays analysts wrote in a research note this month.

Apple had already upended the digital advertising industry when it introduced new iPhone privacy controls last year that hurt the ability of companies like Meta and Snap to target and measure ads on their apps.

Apple’s own advertising business, which consists mostly of developers paying to promote their app on the App Store, is expected to grow 36% this year to $6.9 billion, Barclays wrote, adding that Apple and TikTok will together take 34% of each new advertising dollar. which is spent outside of China this year.

Lior Eldan, chief operating officer of mobile app marketing agency Moburst, which has worked with brands like Uber and Reddit, said customers now spend about two to three times as much on Apple ads, in partly because the effectiveness of ads on other platforms has been degraded by Apple’s privacy changes.

“We’ve seen dramatic increases in budgets on Apple Search Ads as a result of privacy changes,” he said.

Although still much smaller than behemoths like Facebook and YouTube, TikTok is poised to grow more than 200% to become a $12 billion business, Barclays wrote.

TikTok remains important to the advertising strategies of many clients, said Yvonne Williams, vice president of media at ad agency Code3, which has worked with brands like Gap and Dior.

Alphabet’s Google, which reports second-quarter results on Tuesday, is the company most likely to be immune to the negative effects because Google Search is “mission-critical” to many advertisers, the companies said on Tuesday. RBC Capital Markets analysts in a note.

Meta, Snap and Pinterest are more exposed to privacy changes from Apple and competition from TikTok, Barclays said.

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Reporting by Sheila Dang in Dallas; additional reporting by Katie Paul; Editing by Stephen Coates

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