Elephants in the Room

This is proving to be a historically bad year for tech. Few saw it coming. If you bought Facebook stock in 2015, you’ve lost money. If you purchased shares of General Motors, IBM, or Chevron, you’ve made more money than Meta shareholders. Seven years of gains, erased in 10 months. Meta’s meltdown is shocking, but not singular. Google is down 40% this year, Amazon 45%, and Snap 80%. These losses are unprecedented in the Big Tech era. As with bankruptcy, the sell-off happened gradually, then suddenly. Last week was a turning point. Amazon, Google, Meta, and Snap all missed big on earnings. The

common theme? Ads. Or lack thereof. We knew the Mad Men era had come to an end; we weren’t expecting the end of Ad Men. But let’s be honest, advertising sucks. Cable ads provide a glimpse into what it’s like to have restless leg syndrome, and digital ads, while more relevant, are carbon — the noxious byproduct of converting attention into shareholder value via algorithms that bring out the worst in the species. I’ll say it again, advertising sucks. In a surprising turn of events, ads have become Big Tech’s Achilles’ heel. Google’s ad revenue grew just 3% this quarter, down from 43% growth a y

ear ago. For the first time, YouTube ad revenue declined. Snap registered its slowest ad revenue growth ever. Meta’s ad sales, which make up more than 98% of the business, were a trainwreck. Meanwhile

(and yes, this brings me joy) the company continues to incinerate $2 billion a month feeding Mark’s fever dream that he is a god of new worlds. BTW, it appears people are more likely to worship Tom: Myspace has more traffic than Meta’s Horizon Worlds. Macro What is/are the meteor(s) that have struck the Genghis & Khan of ads? Meta says the problem is “the uncertain and volatile macroeconomic landscape.” Google blames “the challenging macroclimate.” Snap, “macro headwinds.” Macro, as in, rising inflation, interest rates, and supply chain issues all conspiring to depress advertising demand. And it makes sense, because if people stop spending money on stuff, then the businesses that make that stuff have less money to spend on advertising. But here’s where it gets scary for these companies’

shareholders: The “macro” culprit is a ghost, as people haven’t stopped spending. U.S. consumer spending beat expectations in September, rising 0.6% for the second month in a row. Meanwhile, the U.S. economy is doing, well, fine — U.S. GDP grew 2.6% last quarter. Of course, there’s still a lot of uncertainty. Growth has slowed, and we’re by no means in the clear. But the weakness we’re seeing in the macroeconomy is a drizzle compared to the Category 5 shitstorm we’re seeing in digital advertising. The state of the economy is a distraction here. Something else is killing ads, and tech companies are reluctant to acknowledge it because, unlike the economy, it’s not cyclical but structural.