July August Shaping up for a Fast Correction and Rebound

July August Shaping up for a Fast Correction and Rebound

Ad Sales

Google is expected to see its first decline in US ad revenues this year as the coronavirus pandemic hits travel advertising, a market tracker said Monday.

New research by eMarketer indicates Google will still be leading digital advertising but with a smaller share as the market evolves into a “triopoly” with Facebook and Amazon.

Google’s net US digital ad revenues will drop 5.3 percent to $39.58 billion to bring its market share down to 29.4 percent, according to the eMarketer forecast which was sharply revised due to the pandemic.

Google’s decline is “primarily because of a sharp pullback in travel advertiser spending, which in the past has been heavily concentrated on Google’s search ad products,” said eMarketer analyst Nicole Perrin.

“Travel has been the hardest-hit industry during the pandemic, with the most extreme spending declines of any industry. E-commerce-related ad spending has also been dampened to some extent: Amazon reportedly pulled its ads from Google search earlier this year as it struggled to meet customer demand for its e-commerce services.”

A big part of the decline will come from “search advertising,” or paid messages deployed by Google when a user enters a search query.

Search ad revenue, in which travel is a major component, is expected to drop by 7.2 percent in the US, eMarketer said.

Facebook is expected to see growth in its US ad revenues of nearly five percent to $31.43 billion, driven by Instagram, according to the report. That would give Mark Zuckerberg’s firm a 23.4 percent market share.

Amazon, meanwhile, is extending its strong growth in online advertising with an expected 23.5 percent rise to $12.75 billion, putting its market share at 9.5 percent, eMarketer said.

Until recently, analysts had described the digital ad market as a duopoly dominated by Google and Facebook, but Amazon has been rising quickly.

Google has been growing at a slower rate than the overall digital ad market since 2016, ” so this year will continue a trend of Google losing digital ad market share in the US,” Perrin said.

Real Estate

Battered by the coronavirus, US existing home sales posted their third straight monthly decline in May, falling 9.7 percent compared to April, the National Association of Realtors (NAR) said Monday.

With the sales pace hitting a seasonally adjusted annual rate of 3.91 million properties in the month, the data was worse than analysts expected and down more than a quarter from the same month in 2019.

The decline was felt in all regions on both a monthly and yearly basis, the NAR said.

However, a fall in supply and an uptick in prices points to a tightening market, and realtors and analysts expect a return of buyers as states loosen lockdowns imposed to contain the pandemic.

“Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year,” NAR’s chief economist Lawrence Yun said, noting May’s data reflects deals closed in March and April, when the virus was at its worst.

Continuing 99 months of year-on-year gains, median home prices ticked up 2.3 percent from May 2019 to $284,600, with increases seen in all regions.

Inventory was at 1.55 million units in May, up 6.2 percent from April but down 18.8 percent from the same month a year ago, which Mortgage Bankers Association Chief Economist Mike Fratantoni said kept prices from collapsing.

“Although demand certainly dropped in March and April due to the crisis, supply dropped even more, and has thus far kept home prices from declining. We expect that home-price growth will pick up over the summer due to insufficient supply levels,” he said.

However, Rubeela Farooqi of High Frequency Economics said the data stands in contrast to comparatively positive numbers in new home sales and construction, while year-on-year sales in May were down 26.6 percent compared to the 17.2 percent posted in April.

“Rising virus cases could put renewed pressure on sales. Also, the underlying trend could slow further as weak labor market conditions weigh on households’ ability to purchase homes,” she said.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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