UBS has revised its 2025 digital advertising growth forecast downward, projecting a 4.5% year-over-year increase, a significant reduction from the 9% anticipated in December.
The adjustment reflects a cautious outlook as advertisers in sectors such as retail, e-commerce, consumer packaged goods (CPG), and travel are reportedly pausing or reallocating budgets towards performance-based spending.
Notably, spending reductions are evident in connected TV (CTV), linear TV, and the open web, where measuring ad performance poses challenges. In contrast, search advertising, which is more direct-response oriented, remains relatively stable.
Overall ad spend growth is now expected to be flat to up 1% year-over-year, falling short of the previously projected 2%. This trend mirrors the early days of the COVID-19 pandemic, with sectors like entertainment, travel, and retail becoming less aggressive in their advertising spend, especially for brand advertising.
Despite market uncertainties, Alphabet Inc. (NASDAQ: GOOGL), a dominant player in digital advertising, has maintained robust revenue growth of approximately 14% over the last twelve months, significantly outpacing the broader market. InvestingPro data indicates the company holds a “GREAT” financial health score, with multiple positive indicators available to subscribers.
UBS experts also observe that while consumer spending continues, there are longer lead times for higher-priced items and a shift towards more price-sensitive options, suggesting advertisers may need to adjust strategies in response to a more frugal consumer landscape.
