Digital channels account for around 60% of worldwide advertising spending (excluding China), up from 30% in 2017. America's tech titans gobble up four-fifths of a $700bn global digital-ad pie. In a typical year American businesses spend 1-2% of GDP on advertising.
Advertising accounts for virtually all of Meta's revenue ($200bn in 2025), most of Alphabet's (just over $400bn) and a growing slice of Amazon's (analysts reckoned it sold nearly $70bn-worth of ads in 2025, nearly double the figure three years earlier). Even Microsoft and Apple have multibillion-dollar ad sidelines. About 30% of the quintet's combined sales come from ads, and a similar share of profits.
In the pre-digital age advertising was a highly cyclical business. A paper published in 2008 by Barbara Deleersnyder of Tilburg University found that cycles in advertising spending were about 40% deeper than in the economy as a whole. In 2012 Robert Hall of Stanford University found that during a downturn firms cut ad spending faster than their sales drop.
Big-tech executives argue that digital advertising is different, because advertisers pay only when someone clicks a link, can track spending choices in real time and benefit from ever-more-efficient AI targeting. With AI, the cost of creating ads could also decline to nearly nothing. Yet pundits have a long record of claiming each new form of media has made advertising recession-proof, only to be disproved. In the 1950s trade commentary argued local TV would make ad dollars weather downturns. In 2000 Sumner Redstone, a media mogul, insisted advertising was "no longer cyclical". Neither prediction was borne out.
Digital advertising held up during the recessions of 2008-10 and 2020, but in 2007-09 it was climbing from a tiny base, so migration from print and television offset cyclical weakness. In 2020 lockdowns forced people to spend more time on screens. Now that digital advertising is dominant, there is less offline share to capture.
Research by Jung Kim of the Commonwealth University of Pennsylvania found tentative evidence that online spending is more pro-cyclical than offline spending. Alvin Silk of Harvard University and Ernst Berndt of MIT found that in recent years aggregate American advertising spending "has become more sensitive to the overall performance of the national economy". Since 2020 the correlation between American GDP growth and digital-ad spending has increased, according to Goldman Sachs. Digital advertisers are heavily reliant on custom from small firms, which may be quickest to cut budgets in a downturn. Digital ads also grant more contractual flexibility than non-digital ones, making it easier for businesses to back out.
Ads are emerging in AI chatbots. In February 2026 OpenAI began testing ads in ChatGPT; Google has been trialling them in its search engine's "AI Mode"; Microsoft has woven them into Copilot; and Amazon's shopping assistant Rufus allows brands to sponsor replies. Meta's chatbot does not yet show ads, but since December 2025 has been passing insights from conversations to Facebook and Instagram to improve ad targeting. In 2026 Meta is set to overtake Google as the world's biggest seller of digital ads, with revenue of $243bn, according to eMarketer. Perplexity stopped showing ads in February 2026, and Anthropic has publicly mocked ad-serving rivals.
"Floggings will continue until morale improves."