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Meta Platforms CEO Mark Zuckerberg speaks at Georgetown University in Washington on Oct. 17, 2019.

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Wall Street’s worst year since 2008 wreaked havoc on tech companies, particularly those reliant on digital advertising.

Facebook parent Meta lost almost two-thirds of its value in 2022 as year-over-year revenue fell in consecutive quarters, leading the company in November to cut 13% of its workforce. Snap’s stock plummeted 81% as growth dipped into the single digits, and the company opted not to provide a forecast for two straight periods. In August, Snap said it was laying off 20% of its employees.

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Following a brutal 2022, investors are starting to return to the online ad sector before a rebound in financial performance that’s expected at some point in 2023. They’re hoping for some signs of a recovery this week as the biggest companies in the space report fourth-quarter results and provide an update on whether brands are starting to spend more on ads after pausing many of their campaigns.

Snap is scheduled to issue results after the close of trading on Tuesday. Meta reports on Wednesday, followed by Google parent Alphabet on Thursday. Also on Thursday, investors will hear from Amazon and Apple, which both have growing digital ad businesses that have been taking market share of late from Google and Facebook.

With concerns of a potential recession still looming large, market analysts anticipate more turmoil ahead for online advertising. A survey of 50 ad buyers published this month by Cowen showed that companies expect their spending in 2023 to rise just 3.3%, which the investment bank said represents “the softest ad growth outlook we’ve seen in five years.” Last year, those companies increased spending by 7.5%.

“Two-thirds of ad buyers factored in a recession as part of their budgeting process, citing inflation and a softening consumer, among other macro factors,” Cowen said.

In addition to the macro challenges, companies that rely on mobile data for ad targeting are still reckoning with upheaval caused by Apple. In 2021, the iPhone maker instituted a new App Tracking Transparency (ATT) feature, which reduced targeting capabilities by limiting advertisers from accessing a smartphone user identifier. Meta said early last year that ATT would reduce revenue by $10 billion for all of 2022.

Meta and Snap over past 12 months

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In its most recent earnings call in October, as Meta’s stock sank in extended trading, CEO Mark Zuckerberg acknowledged a multitude of headwinds facing the company, including the economy, ATT and competition — and he was left thanking the remaining investors for their patience.

“I think that those who are patient and invest with us will be rewarded,” Zuckerberg said.

So far in 2023, there have been some rewards. Meta and Snap are both up more than 22% as January comes to a close. But revenue growth isn’t expected to pick back up until the second half of the year.

Analysts expect Snap to show fourth-quarter growth of less than 1%, followed by expansion of 1.6% in the current period, according to Refinitv.

‘Little bit of a rebound’

Meta, whose ad business is more than 20 times the size of Snap’s, is expected to report a third straight quarter of declines — and its steepest drop yet — at more than 6%, according to Refinitiv. Revenue is expected to fall another 2.8% in the first quarter, before sub-1% growth returns in the second period.

Since April 2021, when Apple’s ATT update went into effect, Meta has been working on improving its advertising technology and has been utilizing data from other sources. Some retailers, for instance, told CNBC that they’ve been porting their customer data from their Shopify websites into Meta’s platforms, which has helped improve the ability for Meta to target personalized ads to users.

“There’s some signals that maybe Facebook is seeing a little bit of a turnaround in ad spending,” said Debra Williamson, an analyst at research firm Insider Intelligence.

However, TikTok has driven consumers from stagnant updates to short videos, and Facebook has been slow to catch up. Meanwhile, even with Meta’s incremental improvements to its ad system, the impact of Apple’s privacy change was so severe that Facebook and Instagram are nowhere close to making up for it.

“Facebook has had a lot of challenges with coming up with its own tools and metrics to be able to prove the effectiveness of those ads,” Williamson said. “I think it’s getting better at that, so I’m hopeful that we will see maybe a bit of a rebound for Facebook compared to the past couple of quarters.”

Google’s business has been less harmed by Apple’s moves, but it’s still being hit hard by the economic slowdown and by TikTok. Growth at Alphabet is expected to come in below 1% in the fourth quarter of 2022 and slowly build in 2023, not reaching double digits until the last period of the year.

Is the bubble bursting for tech workers?

“Among the existing players, TikTok is expected to be the largest share gainer within Digital Video advertising over the next two years,” Cowen analysts wrote. They estimate TikTok will capture 8% of budgets in 2024, up from 6% last year.

Amazon’s ad business has also made major inroads, as e-retailers show their willingness to pay big bucks to promote their brands on the company’s site and across its various services. According to Insider Intelligence, Amazon captured 13% of the digital ad market last year, and in the third quarter its ad business grew by 25% even as overall revenue missed estimates.

Analysts expect Amazon’s ad unit to show growth of 17% in the fourth quarter, well ahead of its peers, and to stick in the mid-teens throughout 2023, according to FactSet.

And then there’s Netflix, which has added advertising as a revenue stream. The company debuted a new ad-supported streaming tier in November that costs $6.99 a month.

“Netflix is expected to climb from 0% of budgets in 2022 to nearly ~4% of Digital Video ad spend by 2024,” the Cowen analysts said.

Still, the biggest uncertainty looming over this year’s online ad market is the shaky economy, said Barton Crockett, an analyst at Rosenblatt Securities. He has a hold rating on Meta, Snap, Amazon and Netflix, but recommends buying Alphabet and Apple, according to FactSet.

If the economy improves, “things that are very economically sensitive, like advertising, will be an attraction for investors across the spectrum,” Crockett said. “That could be great for everyone in this group.”

It’s a giant and risky bet. The U.S. Department of Commerce said last week that consumer spending dropped 0.2% in December, indicating that people are still holding on to their cash.

“In that circumstance, it will be hard for there to be any kind of meaningful expansion of ad spend,” Crockett said.

WATCH: Meta will rebound ‘extremely strongly’

Sorrell: Meta will rebound 'extremely strongly,' Amazon ad revenue will hit $100 billion

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How TikTok’s rise sparked a short-form video race

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How TikTok’s rise sparked a short-form video race

TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.

Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.

TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.

“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”

Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.

“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.

But there may a dark side to this growth.

As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.

“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”

Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.

“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”

Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.

While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.

Watch the video to understand how TikTok’s rise sparked a short form video race.

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Elon Musk’s xAI Holdings in talks to raise $20 billion, Bloomberg News reports

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Elon Musk's xAI Holdings in talks to raise  billion, Bloomberg News reports

The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)

Nurphoto | Nurphoto | Getty Images

Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.

The funding would value the company at over $120 billion, according to the report.

Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.

The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.

Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.

Faber Report: Elon Musk held call with current xAI investors, sources say

The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.

“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”

Read the full Bloomberg story here.

— CNBC’s Samantha Subin contributed to this report.

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Alphabet jumps 3% as search, advertising units show resilient growth

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Alphabet jumps 3% as search, advertising units show resilient growth

Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.

David Paul Morris | Bloomberg | Getty Images

Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.

GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”

The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.

Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.

Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.

Read more CNBC tech news

Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.

During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.

Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.

Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.

Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.

“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.

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Gemini delivering well for Google, says Check Capital's Chris Ballard

CNBC’s Jennifer Elias contributed to this report.

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