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Meta: What to expect for online ad spending following Snap earnings

Yahoo Finance’s Allie Garfinkle joins the Live show to discuss the expectations for Meta’s online ad spending following Snap earnings.

Video transcript

[AUDIO LOGO]

BRAD SMITH: Meta's earnings are on deck, and all eyes are on the ad space as the tech giant faces a weaker advertiser demand environment amid a growing competitive social media landscape. Here to set the scene for what to expect when Meta Platforms reports their earnings, Yahoo Finance's Allie Garfinkle. Allie?

ALLIE GARFINKLE: It is great to see you in real life, Brad. So when it comes to ads, the words I'm hearing here are "softness" and "stabilization." So we can only take so much from Snap from yesterday. But Snap management yesterday wasn't necessarily optimistic. But they're saying maybe the ad environment is stabilizing. I think the real test of that will be today. Analysts have come into the cycle expecting softness, right? In Meta's case, they're saying they may be more insulated than Snap. But that softness is still going to hit them.

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The question is just, by how much? I actually would reference Doug Anmuth of JP Morgan. What he said was that Meta is going to benefit from its base of 10 million-plus advertisers. So that can help them show some resilience here theoretically. It's important to remember that when we're talking about ads-- especially in the context of Meta-- that this is fundamentally a macro issue. You have a butterfly effect scenario playing out where you have-- inflation goes up, companies cut budgets. Those ad budgets have gotten cut, including tech companies.

The way I've been explaining it to people is that with the ad market, we've been watching dominoes fall in real time. And once the dominoes are over, it's hard to get them to stand back up. And that's the ad market that Meta is in today. And Meta is an ad company.

BRIAN SOZZI: Well, can they still-- given that weakness in ads, can they push forward with these aggressive investments in the metaverse?

ALLIE GARFINKLE: That's a great question. We know analysts are going to definitely be watching Reality Labs losses. There was a question someone asked me recently that was, do we even care about the metaverse?

BRIAN SOZZI: Do we?

[LAUGHTER]

ALLIE GARFINKLE: I think-- I don't know if anyone at this table does, but I do think that we are not the audience for it. So I think the real question is going to be 10 years from now, will the kids today care about the metaverse? The answer seems to be yes. However, we have to care about it today. And analysts care about it today because those losses are racking up, Brian.

JULIE HYMAN: I was just looking at the stock. And obviously, it was down 60-something percent last year. It's bounced about 20% this year. And I think we all recognize that the bounces we've seen in tech stocks don't reflect real optimism, necessarily, about tech stocks. It's more just a reflexive hope.

ALLIE GARFINKLE: Yeah. Exactly. Exactly.

JULIE HYMAN: But are we seeing that there is any kind of optimism baked into the analyst commentary, besides just not doing terribly?

ALLIE GARFINKLE: I think there's a lot of-- optimism is a relative term here. I think the optimism of a few years ago is just nonexistent at this point, from what I'm gathering. But I think with everyone using words like "stabilization--" they're like, maybe it's happening. Maybe it's happening. And there's-- at a certain point looking at data, you're going to see what you want to see. And I think people definitely do want to see that stabilization. The question is, what does that really look like? How much does it help? The era of real growth tech might be over for the time being.

JULIE HYMAN: Interesting. All right. Thanks, Allie. Appreciate it.