These platforms rely mainly on advertising to generate revenue, and in 2021 these companies experienced a massive patronage as business owners used advertising to reach their potential customers.
In 2021, ad spending in the U.S. increased by 38% compared to previous years. Alphabet, the world’s largest digital advertising platform, generated revenues of $257 billion in 2021.
However, a number of factors have led to a decline in advertising, including inflation, the ongoing war in Ukraine and the end of a COVID-induced lift into advertising.
According to Nathanson, an analyst at MoffettNathanson, the growth of the advertising market in 2021 was driven in part by an “unprecedented spike” in profitability among companies that saved money on office space and expansion, which meant they had to spend more on marketing and brand spending on ads to get customers to shop online.
But the trend is changing, as e-commerce’s share of retail sales has returned to pre-pandemic levels, and corporate spending is likely to rise when workers return to the office.