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Will Russia-Ukraine War Hurt Growth of GOOGL, FB & Others?

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The ongoing war between Russia and Ukraine, and the escalating tensions associated with it have shaken the entire world and created turmoil in the market.

Further, many countries have imposed sanctions on Russia in order to limit its aggression toward Ukraine.

All of these have turned out to be a major headwind for the advertisement industry as well as Internet companies like Alphabet (GOOGL - Free Report) , Meta Platforms , Twitter and Snap (SNAP - Free Report) , which generate the majority of their revenues from ad sales.

Russia has not only blocked the Internet in some parts of Ukraine by destructing Internet towers but also jeopardized the ad prospects of the above-mentioned companies.

GOOGL, FB, TWTR & SNAP Stop Ad Sales

The above-mentioned tech giants are facing mounting pressure from Russian regulators to suspend their ad sales in Russia and stop the spread of misinformation. This is likely to make the investors worrisome about the stocks.

Year-to-Date Price Performance

 

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Reportedly, Alphabet’s Google received an order from Russia’s Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications — Roskomnadzor — to stop showing ads delivering inaccurate information about casualties sustained by Russian forces and Ukrainian civilians, and false political information about Ukraine. According to the regulator, these ads are misleading the Russian audience.

As a result of all these, the search giant finally had to put a stop to its ad sales in Russia, which include search, YouTube and third-party publishers. It has restricted RT — a government-owned media platform of Russia — as well as other channels from using its platforms like YouTube and other apps.

Apart from Google, Meta restricted Russian state media from running ads on its platforms. Moreover, Russia accused Facebook of censoring the Russian media. As a result, the use of the platform in the country has been restricted.

Meta has been ordered to stop labeling and fact-checking posts from four Russian state-owned media organizations.

Meanwhile, Twitter suspended advertisements in Ukraine and Russia. Further, it has been actively monitoring the risks and working to eradicate disinformation regarding the Russia-Ukraine war and the political scenario.

Snap has taken similar steps as a result of the growing censorship demand.

Are Tech Giants in Trouble?

We note that the Russia-Ukraine war’s consequences will have a negative impact on ad revenues of the Internet companies.

Nevertheless, Alphabet, Meta, Twitter and Snap, currently carrying a Zacks Rank #3 (Hold), have the potential to overcome the impacts of the ongoing aggravating geopolitical tension.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Google’s robust strategies, growing ad initiatives and strong efforts toward the removal of bad ads are likely to continue aiding growth in its advertising revenues in the near term. Its deepening focus toward promoting the interests of businesses of all sizes remains noteworthy. The solid momentum across YouTube users is another positive.

Notably, advertising revenues of Google grew 32.6% year over year to $61.2 billion and accounted for 81.3% of total revenues in fourth-quarter 2021.

Then again, Meta continues to witness significant traction in online and mobile advertising spending. The company’s Instagram has emerged as an important cash cow after introducing its ad platform to advertisers worldwide. Also, the introduction of the latest tools to promote posts and evaluate business performance directly on Instagram is expected to continue to aid it in attracting advertisers.

Meta reported advertising revenues of $32.64 billion (96.9% of fourth-quarter 2021 revenues), which increased 20.1% year over year.

Meanwhile, Twitter continues to gain from brand advertising and solid momentum across promoted products (promoted tweets, accounts and trends). The company’s total advertising revenues were $1.41 billion in fourth-quarter 2021, which went up 22% year over year and accounted for 89.8% of total revenues.

Snap’s transition to automated or programmatic auction of Snap Ads is driving its advertising revenues. The company’s improving user engagement, particularly in the 13-34-year-old demography, is continuously expanding its advertiser base. Its ability to help advertisers reach millennials and Gen Z audience remains another major positive.


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