Sir Martin Sorrell, Executive Chairman, S4 Capital.
Eóin Noonan | Sports File | Getty Images | Web Summit
Advertising titan Martin Sorrell believes Meta will rebound “extremely strongly this year” and sees a promising outlook for US tech giants, despite a bruising 2022 and mass layoffs.
US tech companies have let go of more than 60,000 employees in the last year, as slowing economic growth, higher interest rates in response to soaring inflation and competitive challenges squeezed margins and hammered the stock prices of tech behemoths.
Facebook parent Meta in November announced plans to eliminate 13% of its staff, amounting to more than 11,000 employees. It also issued bleak fourth-quarter guidance that wiped out around a quarter of its market cap, pushing the stock to its lowest since 2016.
A broad slowdown in online ad spending and competition from new rivals such as TikTok, along with challenges associated with privacy changes to Apple’s iOS, have hampered the social media group’s business over the past year.
The company has also taken a substantial hit from its massive investment in building its augmented reality world known as the metaverse — a strategy that has proven divisive among analysts and investors.
Sorrell, executive chairman of UK advertising agency S4 Capitalexpects Meta to address most of its business challenges in 2023, while benefiting from China’s reopening.
“I think you’ll see Meta come back extremely strongly this year, on the back of reels and business messenger, to deal with the competition from TikTok and other short form video competitors,” Sorrell told CNBC on the sidelines of the World Economic Forum in Davos, Switzerland.
“Google had a solid year last year, and I think they’ll have a strong year this year. Amazon increased its advertising revenues from $31bn to $41bn, and I think [it] will hit $100bn in time, despite what you’re seeing in terms of jobs and hiring.”
He also suggested that the reopening of the Chinese economy would be “huge” for big tech firms, noting that outbound Chinese business, or Chinese companies expanding their businesses abroad, were historically the second-largest profit centers for the likes of Meta, Amazon and Google parent Alphabet.
Sorrell launched S4, which operates in both the digital advertising and digital transformation spaces, after leaving ad giant WPP in 2018. S4 on Wednesday confirmed its full-year guidance, and Sorrell said his clients’ advertising spending priorities in 2023 would be “topline growth in activation and performance” and “reducing [the] cost of digital transformation.”