Q3 ad spending is trending ahead of initial expectations: expert

Investing.com -- Third-quarter online ad spending is running stronger than anticipated, with artificial intelligence emerging as a key driver, according to Bank of America.

BofA hosted a call with Ben Legg, former chief executive of Ad Parlor, to assess recent sector trends. Analysts said, “Growth in 3Q has accelerated vs 2Q across most platforms and is tracking a few points above expectations.”

They added that “AI capabilities (including automated campaign management, AI-generated creative, and deeper data integration)” are supporting momentum.

Legg noted that AI-powered search is reducing search engine optimization traffic to third-party websites, but that shift is “benefiting sector (incl. Meta) as advertisers redirect more spend into paid channels.”

He is also said to have pointed to TikTok’s weakness as a near-term positive: “Declining spend on TikTok has been a sector tailwind, which could reverse if a TikTok U.S. sale deal is completed.”

Google Search is among the biggest beneficiaries. Legg observed that advertisers are seeing “expanded data&CRM integrations, along with native AI ad formats (like overlay and overview ads)” boost conversions and lift cost-per-clicks.

Looking ahead, he suggested Google could eventually “transition from a CPC to a transaction-based CPA model, optimizing for outcomes.”

Meta is also seeing “relatively strong” growth, according to Legg, who cited AI-driven targeting, adoption of overlay ads, rising Reels usage, and one-click shopping formats. He added that WhatsApp for Business is gaining traction following July’s pricing change.

On YouTube, Legg said growth has been “healthy (but in-line with expectations),” helped by Alphabet’s Gen-AI video creation tools, which lower barriers for advertisers and accelerate adoption.

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