In the upcoming fourth-quarter results, the impact of generative artificial intelligence on Alphabet (GOOGL.O) and Meta Platforms (META.O) advertising businesses is expected to be modest. Both companies have integrated AI tools into their advertising platforms, allowing for more targeted and diverse ad campaigns. However, analysts suggest that the current impact might not match the initial hype, and investors are now looking for incremental use cases and revenue streams from these advancements.
Microsoft (MSFT.O) appears to be an early winner in the generative AI race, leveraging it to fuel demand for its cloud services. Despite the buzz around generative AI, the core business of digital advertising is anticipated to show resilience in the fourth quarter.
Looking ahead, political advertising is poised to be a significant catalyst for Meta and Google in 2024, with a projected 30% increase in spending compared to the 2020 presidential election. Alphabet's Google is expected to report an 11.8% growth in fourth-quarter advertising revenue to $66 billion.
Google's experimental AI chatbot Bard and its search generative experience (SGE) have been introduced, but their immediate impact on business is uncertain. SGE, by 2025, could contribute between $35.6 million and $113 million in incremental search advertising revenue, depending on user engagement with AI-generated responses.
Meta, the second-largest digital ad platform, has seen positive results from its AI tools, with advertisers estimating time savings of at least five hours per week. Analysts estimate Meta's fourth-quarter revenue to be around $39.1 billion, showcasing the potential impact of AI tools on its advertising business.
Snap (SNAP.N) has partnered with Microsoft for sponsored product links in its chatbot, with estimated earnings from these links reaching $234 million in 2022 and growing to $686 million in 2025. Amazon.com is set to launch ads on its Prime Video service, potentially boosting ad revenue growth by 5% to 10%.
In summary, while generative AI's impact on advertising giants may be muted in the short term, its potential for reshaping the industry remains a focal point for investors and businesses alike.