IAC warned of a softening in corporate advertising spending Tuesday, even as inflationary concerns appear to have not affected the consumer just yet.
In its second-quarter earnings report, the media company said its DotDash Meredith segment, publisher of People magazine, Entertainment Weekly and InStyle and more, saw a “rapid pullback in ad spend” starting in June. This joins similarly negative advertising reports from tech companies such as Snap, Meta and more in the last quarter.
“Whether out of fear, data, or opportunity, companies are clearly cutting spend well ahead of the consumer,” CEO Joey Levin wrote in a letter to shareholders.
Starting in June, Dotdash Meredith saw its ad rates for retail, consumer packaged goods and food customers decline year-over-year compared to growth in the preceding months. In response, IAC said it will slow hiring and reduce discretionary spending.
Consumer spending has not pulled back as much yet, according to the company. However, Care, a family and home care site, saw a slowdown in its subscriber growth, and IAC warned that consumer spending may follow a similar path.
“We’ve seen small declines in traffic, conversion and renewal, perhaps due to consumers making small lifestyle changes with rising inflation, but we haven’t seen evidence of lost ground competitively,” the letter said.
These trends played into the company’s second-quarter earnings, with IAC company reporting revenue of $1.4 billion and a loss per share of $10.02, both coming in below most Wall Street estimates. Excluding the revenue from Meredith Corp., which the company acquired in December 2021, the company saw its pro forma revenue fall 18 percent year-over-year due to lower advertising rates, softening consumer demand (largely related to financial services products), as well as restructuring in the first quarter of 2022, which included shutting down the print editions of Entertainment Weekly, InStyle, EatingWell, Health and more.
The company remains all-in on the business, disclosing that IAC has repurchased $59 million worth of shares in the second quarter, marking the first share repurchase since 2018. However, Levin cautioned that the company is still contending with the impact of the pandemic and stimulus payments, and now inflation.
“We still build businesses at IAC, and we believe long-term investment in innovation generally prevails – we just need to prepare for an environment where customers have less money to spend,” the letter reads.