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Facebook and Google impervious to any advertising recession predicts analyst

Money / Pixaby

A predicted advertising recession could affect social media companies such as Snap and Twitter but is unlikely to dent giants such as Facebook and Google, according to a new report.

Following weaker than average reports by agency networks IPG and WPP, Aegis Capital analyst Victor Anthony has stated his belief that an advertising recession is on its way.

"We find it hard to vision that consumer package goods companies [Procter & Gamble, Unilever, Kraft, PepsiCo, CocaCola, etc...] who are big brand advertisers and are under pressure, would not trim their online ad spend in the event of an ad recession," he has written according to a report by Barron's.

Earlier this month, the world's largest network, WPP, revealed first half like-for-like revenues down 0.3% and like-for-like sales down 0.5%, which it said was slower than the first quarter.

In releasing those figures, chief executive Sir Martin Sorrell highlighted the importance of media spend to Google and Facebook, stating that both were main sources of where it placed its client advertising for the year.

“In a slower growth world, both more recently and post-Lehman, inflation has been negligible, perhaps also suppressed by digital deflation. As a result, clients have markedly less pricing power and finance and procurement departments are very focused on cost," said the WPP report.

"In this world, it is, perhaps, not surprising that clients have reduced spending. If you look at the S&P 500 for example, significant like-for-like top line growth seems confined to the technology sector and 10 or so HMOs in the pharmaceutical sector. Beyond these, top line growth is anaemic."

Last year, Magma, the research arm of IPG Mediabrands, predicted a global slowdown in advertising rates, with growth of 3.6% this year, compared to 5.7% in 2016. It put this down partially to a lack of major sporting events such as the Olympics or World Cup taking place, as well as the US general election having also increased last year's global spend figures.

It also claimed that Facebook and Google had seen a rise in their dominance of online advertising spend, increasing to 54% from 44% the previous year.

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