The advertising recession is significantly hitting tech giants Google, Meta, and others, Q4 2022 earnings reports show. Is the Hispanic advertising sector, e.g. companies like TelevisaUnivision and Entravision, shielded against this trend? There are reasons to be optimistic…
So far, earnings announcements by tech giants and media companies show lower advertising revenues in the fourth quarter of 2022, as well as a muted outlook for the current Q1 2023 quarter.
“We continue to see declining prices for advertisers across key digital marketing channels, even as those ads reach more eyeballs and generate more clicks,” said Chris Costello, Senior Director of Marketing Research at Skai. “While structural factors like ad inventory are likely part of that trend, advertisers seem to be adapting to shifting economic conditions by maximizing budgets and getting in front of customers wherever they can.” Skai just published an in-depth analysis of the digital marketing trends that defined the fourth quarter of last year.
Tech giants and media companies that have reported for the fourth quarter of 2022 so far include:
- Alphabet missed revenue expectations, with Google’s ad revenue falling nearly 4% and YouTube’s down 8% year over year. It has to be noted that YouTube’s decline is not only due to the advertising recession but also due to the ascent of TikTok videos and the growth of the AVOD, Advertising Video on Demand, and advertising-supported SVOD (Subscription Video on Demand) segments.
- Comcast reported a 5.6% decline in advertising revenue (excluding the World Cup).
- Meta saw a third straight quarter of revenue decline, with its average price per ad falling 22% despite impressions being up 23% year over year. In addition, to lower social media advertising prices, Meta also reported that total revenue for its Family of Apps in Q4 2022 was U.S. $31.4 billion, down 4% YoY. According to the company, the decline in revenue was due to weak advertising demand and an uncertain macroeconomic landscape.
- Snap also missed revenue estimates for the third straight quarter, with CEO Evan Spiegel saying on its earnings call that “advertising demand hasn’t improved, but it hasn’t gotten significantly worse.”
Some sectors, like the podcast market, seem less impacted by the advertising recession. Spotify reported a 14% YoY growth in quarterly ad-supported revenue and a “mid-30% range” YoY growth in podcast revenue.
The Advertising Recession and Hispanic Advertising
Taken as a country the U.S. Hispanic market is the third-largest growing economy in the world. Therefore, there is a strong rationale for advertising targeting Hispanic consumers to increase much more than overall U.S. advertising. Additionally, as we stated recently in an article on marketing insights by major corporations these insights, and the advertising campaigns these insights are based on, need to reflect the fact that brands market in a multicultural America.
That is how Wade Davis, Chief Executive Officer of Televisa Univision, thinks: “Particularly when you think of advertisers in a challenged macroeconomic environment thinking in a more disciplined way about the ROI from their ad spend–As we’ve reoriented our go-to-market approach and the capabilities that we have to bring to bear on behalf of our advertisers, we are super confident that the ROI from a marginal dollar spent in an under-penetrated Spanish language market in the U.S. is massively greater than the marginal impact of a dollar spent in an oversaturated English language market, “David stated during TelevisaUnivision’s Q3 2022 earnings call last October.
According to Davis, the value proposition that TelevisaUnivision has in general, but in particular in a down market, “represents hundreds of millions of dollars to us in the U.S. Only about 1/3 of television advertisers currently advertise in Spanish. And so our ability to capture low- and zero-share advertisers, even as the broad markets might be down, is something that should continue to be a tailwind for us.”
On the other side, it also has to be said that in the past often, multicultural and Hispanic advertising budget line items got cut by Corporate America during recessions.
The U.S. Hispanic market is the third-largest growing economy in the world. Therefore there is a strong rationale for advertising targeting Hispanic consumers to grow at a much higher rate than overall U.S. advertising.
What can be said about how Hispanic targeted advertising evolved in Q4 2022 and how it will develop in 2023? The two publicly quoted Hispanic-targeted media companies, Entravision Corporation and TelevisaUnivision, which is part of Grupo Televisa, have not reported their Q4 2022 financial results yet. They are expected to do so on February 23 and March 3, respectively. Up to the third quarter of 2022, Entravision showed a significant revenue expansion: “For the nine months ended September 30, 2022, revenue totaled U.S. $659.9 million, up 25% year-over-year. Year-to-date revenue benefited from growth in our digital segment and strong political advertising revenue in our television and audio businesses. Consolidated adjusted EBITDA totaled $26 million for the third quarter, up 12% year-over-year,” the company stated during its Q3 2022 earnings call last October. In addition to the U.S. Hispanic market, Entravision has a substantial presence in Latin America and, lately, has expanded into European, African, and Asian markets.
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What can be said about the advertising revenue situation at TelevisaUnivision?
At TelevisaUnivision’s last earnings call for Q3 2022 last October, management said that U.S. national advertising had grown 8% and overall Mexico advertising revenue grew 9%. The key drivers were strong upfronts in the U.S. and Mexico that drove higher volumes and prices and growth in streaming-related advertising. “Everybody that has an ad-supported business in the U.S. is feeling some impact from a macroeconomic standpoint. And we’re not immune to that, however, we have been able to continue to grow our business at a very healthy level…Adjusted out for the 10% impact of comping soccer, our U.S. national ad sales would have grown 18% in Q3, which is an acceleration over the 13% Q2 U.S. national ad sales we saw. And what I would say, without really breaking our tradition of not giving guidance, we expect that we’re going to see continued acceleration on a sequential basis, going into Q4”, Wade Davis, Chief Executive Officer of Televisa Univision, stated during the Q3 2022 earnings call.
Davis does not see a significant impact of Disney and Netflix advertising supported tiers on the Hispanic ad market: “I think it’s going to be different in the U.S. and Mexico for us. First of all, we don’t think it’s really going to have a significant impact on us in particular. They didn’t go through the upfront, so it’s purely going to impact the scatter market. And we think it’s largely going to be a share shift within English-language. And, frankly, Netflix and Disney coming to the market will continue to drive a focus on the importance of premium ad-supported streaming. And for us, as the market leader in Spanish-language, more focus on that segment of the market is good for us.”
Only about 1/3 of television advertisers currently advertise in Spanish. And so our ability to capture low- and zero-share advertisers, even as the broad markets might be down, should continue to be a tailwind for us.
TelevisaUnivision and Entravision earnings announcements in the coming weeks will provide a better picture of how Hispanic advertising fares within the overall scenario of the U.S. advertising recession.