Discussion of the so-called ad recession has consumed earnings conversations this season as major tech companies warn of dwindling ad revenue as consumer spending declines. weak and tight marketing budgets. That, combined with the ongoing headwinds from Apple’s privacy changes, is wreaking havoc on a ravaged tech and social media industry, where advertising generates a sizable chunk of revenue. While conditions could trouble these players in the coming months, there are some stocks that are better insulated from these headwinds. Analysts say investors looking for this trend should consider focusing on search names and those that are distinct from Apple’s privacy policy. Some of the biggest names in the industry are already starting to feel the pinch due to the deceleration of advertising. Snap attributed its recent poor results to slow advertising demand and also blamed Apple. Meta also blamed the disappointing Q3 forecast for weak advertising, while Roku stock rose more than 23% on dismal results it blamed on slowing advertising. Shares of all three stocks are down more than 50% this year, with Snap shares down nearly 88% from a 52-week high. Big tech isn’t the only area of the ad market affected. The softening environment is weighing heavily on streaming names like Paramount, Warner Bros. Discovery and Fox, and will likely continue for the foreseeable future, Wolfe Research’s Peter Supino said in a recent note to clients. “We will see market share change as the pie stops growing or shrinks over the next six months,” said Rohit Kulkarni of MKM Partners. Bet on Search and Google Many analysts believe search names – specifically Alphabet – are among the companies best positioned to tackle volatility and say they should continue to gain market share from other companies. Kulkarni notes that search often focuses on behaviors and users actively searching for similar terms. This often allows advertisers to more easily target, collect data, and ultimately see better returns – and it’s easily measurable through clicks. The method is also unaffected by Apple’s privacy issues, which have plagued many social media lovers. “The search is very well positioned to weather the storm because it has a very wide range,” said Andrew Boone, an analyst at JMP Securities. “It’s essentially comprised of goods and services, and because of that breadth, one piece can compensate for another.” Alphabet said on a recent earnings call that revenue from Google search and other ads grew 14% to $40.7 billion, while searches for terms like “open now” hours” and “near me” increased by eight times over the same period last year globally. Shares are down about 19% this year. Google search is often the first and last step for consumers, making it an integral part of the consumer experience, MNTN CEO Mark Douglas explained on “The Exchange” on Monday. last month. He explained that most of the budget cuts from companies in the future will come from brand advertising, which is farthest away from consumers. Wells Fargo’s Brian Fitzgerald told Squawk on the Street earlier this month: “These business models that combine both advertising and e-commerce will remain resilient as we get over these biases. this macro in the second half of the year. Looking outside the Apple ecosystem Apple’s iOS changes are another factor that continues to weigh on advertising dollars. Rolled out last year, this change prevents ad-supported websites from accessing the unique identifiers of iPhones or iPads that users don’t opt-in to, and increasingly makes it difficult for ads to be targeted. pepper. According to Barton Crockett, an analyst at Rosenblatt Securities, companies outside of the Apple channel are better positioned to weather this advertising slowdown. Crockett points to search heavyweight Alphabet and e-commerce giant Amazon, which have benefited from advertising dollars leaving the Apple ecosystem as advertisers seek to measure return on investment. private. To be sure, some companies are making progress in finding ways to address the Identifier for Advertiser (IDFA) challenges, but there’s no easy way around it, says Maria Ripps of Canaccord Genuity. know in a recent note to clients, note that these obstacles are affecting small and medium-sized businesses advertising business especially hard. “These dynamics are impacting SMEs more deeply than large enterprises because SMEs tend to be more performance-oriented and highly focused on advertising ROI,” she writes. short term report”. Looking beyond big tech Many lesser-known names could also offer a chance to weather the advertising downturn, according to some analysts. Loop Capital’s Yun Kim calls DoubleVerify Holdings a good name to weather the downturn, saying in a note to clients that the company’s focus on ad volume over placement ratio is better in this environment. . “With the current slowdown in the digital advertising industry driving prices down, we expect brands to increase their ad placements to take advantage of this market condition, even,” said Kim. when their overall digital ad budgets are under pressure,” Kim said. Justin Patterson of KeyBanc Capital Markets favors companies with limited international exposure and those focused on connected TVs, pointing to names like The Trade Desk. While not entirely immune to macro conditions, the company’s access to “high growth channels” such as political ad spend is an advantage it has over some of the larger players. more, he wrote. Many local TV companies also appeared to benefit in the early stages of the advertising recession, fueled by strong labor market trends and local business activity, Crockett said. For example, Comcast’s NBCUniversal saw ad revenue drop about 1% year-over-year, although the parent company’s cable business saw a 10% increase in ad sales during that period. , in part due to increasing political advertising, he said in a note to clients. “This is the most curious advertising recession in history,” says Crockett. “We’ll see how it develops from here.” – Michael Bloom of CNBC contributed reporting Disclosure: NBCUniversal is the parent company of CNBC.