Big Tech's perfect storm Aryaansh

2022 has given us a spectator view of the stormy bloodbath between Nasdaq's Big Tech Godzillas and only one thing mattered in the tsunami of panic sellingresilience. Alphabet proved that digital advertising is not immune to global economic storm clouds as both Google Search and YouTube revenue dips were a shocker. Meta proved that you cannot build a billion-dollar business off of “virtual real estate” and that a lack of bathrooms is still a pressing issue in the metaverse. The free-money faucet was turned off by Jerome Powell and his cronies at the Fed a long while back, and the smart guys are hunting for some safe companies to park their big bucks. Here’s a little checkup on how healthy Facebook and Google are looking:

Alphabet: The ad king under pressure

Sundar Pichai and co. reported $280 billion in revenue for 2022, up 9.78% from 2021. However, this growth was slower than expected, as both Google Search and YouTube ads needed higher demand. The first department where companies cut costs is marketing, so all those million-dollar ad budgets are quickly evaporating. That gives Google Search a big hit.

Google Search & other revenue dropped from $43.3 billion in Q4 2021 to $42.6 billion in Q4 2022, while YouTube ads declined from $8.6 billion to $7.9 billion over the same period. These segments account for a lot of Alphabet's growth, so any weakness here could have significant implications for its profitability and valuation. On the bright side, Alphabet continued to invest heavily in its cloud computing business, which generated $26.3 billion in revenue for 2022, up 37% from 2021. This segment is still behind Amazon Web Services (AWS) and Microsoft Azure in market share, but it has been gaining ground fast

Alphabet also saw strong growth in its "other bets" segment, which includes side projects such as Waymo (self-driving cars), Verily (life sciences), Loon (internet balloons), Wing (drone delivery), and Calico (biotech).

This segment generated $1.1 billion in revenue for 2022, up 42% from 2021. However, it also incurred an operating loss of $5.5 billion for 2022, indicating that these bets are still far from being profitable or scalable.

Google going crazy.

Meta: The social giant under scrutiny

Zuckerberg reported $116.6 billion in revenue for 2022, down 1.12% from 2021. That’s their first revenue drop in history. The pandemic has accelerated the shift to online commerce and social media, but it has also exposed the dark side of these platforms. From misinformation to privacy breaches to mental health issues, Meta has faced a barrage of criticism and lawsuits that have eroded its public trust and reputation. This gives Facebook and Instagram a pretty big hit. Plus, Facebook is no longer cool with the Gen Zers and millennials, who prefer to spend their time on Insta and Snap instead of hanging out with the aunties. Facebook's time spent per user per day in the US was 34 minutes in 2019, but it dropped to 32 minutes in 2020 and currently sits at 29 minutes.

That 5 minutes might not seem like anything, but add all that up amongst 2 billion users, and we have a multi-billion dollar casualty on our hands. Less time spent on the platform means fewer ad dollars in the pocket, meaning the entire business could boom. And I’m not even gonna talk about their metaverse. (which incurred a $14 billion loss last year, and will give them a $16 billion dent this year). It would be crazy to think about everything happening in 2021. But hey, as they say, there’s no way to tell when the good old days are unless you leave them It’s now a different game. No longer one of the unicorns. It’s one of the cockroaches.