osoft Search and Advertising revenue increases 3% despite a drop in ad spending

Microsoft’s advertising division failed to perform as expected in second quarter 2023.

Microsoft’s advertising and news search revenues increased by $86 Million, or 3%. This includes traffic acquisition costs paid to publishers by Microsoft. Search and news advertising revenues – excluding costs for traffic acquisition – were up by 8%.

The company attributes the increased search volume to its acquisition of Xandr and the platform for ad buying that it acquired from AT&T.

Microsoft has stated that despite the growth signs, these figures are still “a little behind expectations” because of lower advertising spend.

Microsoft did not report its revenue in dollar terms (although we’ll update this article when it happens), but confirmed that LinkedIn revenue exceeded $15 billion in Microsoft’s fiscal year 2023, after a 5% growth and 7% in constant currency.

The company attributes the growth in revenue to the expansion of Talent Solutions. Some bookings continue to be affected by the weaker hiring climate in key verticals.

These numbers, however, were below the Q2 forecast, as the growth in Marketing Solutions was offset by a decrease, also due to lower advertising spend.

• Advertising spend was lower than expected, which affected Search and News advertising as well as LinkedIn Marketing Solutions. We expect revenue growth for LinkedIn to be in the low-to-mid single digits. Even with gains in our hiring business growth will be affected by the overall markets of recruiting and advertising. This is especially true in the technology sector where we are heavily exposed,” said Amy Hood.

Why we care. Analysts predicted that the Q2 quarter would be more successful due to increased investment in AI, following a decline in digital advertising demand earlier in the year. The company’s most recent results reveal that the growth rate was lower than expected due to a decrease in advertising spend. Those who expected AI investments to produce immediate, significant revenue results may have been overconfident.

Earnings Report. For more information, read Microsoft’s Q2 Performance Report.

The post Microsoft Search and Advertising Revenue Up 3% Despite Ad Spend Drop appeared initially on Search Engine Land.