Tech giants are no longer impervious to the real world

(San Francisco) From San Francisco to Seattle, the U.S. tech sector worries with slow growth and bleak forecasts showing internet giants that seemed untouchable are being overtaken by the economic crisis and competition from new actors.

Posted at 3:04 p.m.

Julie Jammot
France Media Agency

“This week will go down in the history of financial results as one of the worst for the Big Techor even a possible turning point, “said analyst Dan Ives of Wedbush Securities on Thursday.

Alphabet, the parent company of Google, achieved its weakest revenue growth this summer since 2013, apart from the start of the COVID-19 pandemic.

Microsoft, carried by the cloudspublished strong quarterly results on Tuesday, but warned that Azure, its remote computing platform, would grow less quickly during the end of the year.

As for Meta (Facebook, Instagram, WhatsApp, Oculus), it’s a “disaster”, according to Dan Ives. The title of the company plunged 19% on Wednesday evening, a consequence of profits halved to 4.4 billion dollars, and especially comments from Mark Zuckerberg.

The founder of the Californian group insisted during the analyst conference on its priorities, namely “artificial intelligence technologies that make it possible to recommend reels (short videos copied to TikTok, editor’s note) to users”, “advertising tools on messaging” and “our vision for the metaverse”.

“Those who are patient and invest with us will be rewarded in the end,” said the leader.

“The worst is over”

But the immense deployment of resources to build a parallel world, accessible via augmented and virtual reality, is attracting more and more skepticism from observers, at a time when inflation and rising interest rates eat into corporate margins.

“There is no information on the revenue potential that Meta could derive from the metaverse. Nobody knows,” notes Insider Intelligence analyst Debra Aho Williamson.

“Google has a better chance of rebounding quickly, because its search engine has been a bedrock of the internet for decades, both for consumers and businesses. Its economic model is not broken, ”she elaborates.

Faced with global economic difficulties, many advertisers have cut their marketing budgets.

Snapchat is particularly affected by this: despite the good growth of its users, the application with augmented reality effects is considered an experimental communication channel.

Meta, for its part, saw the number of advertising spaces sold increase by 17% in the third quarter, while their average price per unit fell by 18% year-on-year.

“We knew that global ad spend was going to contract. But I think the worst is over,” said Tejas Dessai, analyst at Global X ETFs. “And it’s not going so badly, the declines remain modest given the pressure on exchange rates and inflation.”

“Formidable competitor”

Silicon Valley is also suffering from an unfavorable comparison effect with 2021, when the pandemic still greatly benefited online services.

But one of the reasons for the depression of the major platforms is not about to disappear: the ultra popular TikTok continues to take up space.

In 2021, the entertainment app overtook Google as the world’s most popular website, according to Cloudflare, an internet service provider.

Google and Meta have copied TikTok’s successful format, with “shorts” and “reels”, respectively, but they are struggling to turn their investments into profits so far.

“More than 140 million reels are played on Facebook and Instagram every day, 50% more than six months ago”, however announced Mark Zuckerberg. “And we think we’re gaining spent time market share (on our apps) from competitors like TikTok.”

“TikTok is a formidable competitor, but in terms of advertising revenue, there is no comparison,” recalls Debra Aho Williamson. Industry veterans are “still way ahead”.

Amazon and Apple are due to announce their quarterly results on Thursday evening.

The market expects iPhone demand to hold up well despite the unfavorable economic conditions.

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