Q1: Amazon - the next big medium for advertisers, Twitter's 50% ad revenue came from video
Facebook doubled ad revenue, 85% of Google's revenue came from ads, Amazon saw 139% ad revenue growth, 50% of Twitter's ad revenue came from video
The week that went by saw the first quarter financial results of technology behemoths Alphabet, Facebook, e-commerce leader Amazon and social media site Twitter. Every balance sheet and earnings call that followed gave the advertising community a few crucial lessons on the digital medium. Here is a quick look at the key takeaways from the Q1 results of each of these leading digital advertising platforms.
In what was the most turbulent times for Facebook, the company’s advertising revenue doubled to $11.8 bn from $7.8 bn in Q1 of 2017.
Not just that, both daily active users (DAUs) and monthly active users (MAUs) grew by 13 per cent YoY to reach 1.45 billion and 2.20 billion respectively as of March 31, 2018.
Of the $31.15 bn revenue that Google parent company Alphabet posted in the quarter ending March 31, $26.6 bn or around 85 per cent came from advertising.
This happened in a year when advertisers like P&G, Johnson & Johnson, Verizon, General Motors, and Coca-Cola etc suspended advertising on YouTube over concerns of brand safety. P&G returned to YouTube after a year-long break in mid-April with one caveat: it will advertise only on videos the company has reviewed and approved.
Advertisers cannot ignore YouTube and Facebook, even if that’s what they wish to do.
“The numbers show that if audiences are on platforms, advertisers will continue to advertise despite privacy concerns. I think advertising will fall only if users start leaving these platforms which is currently not happening. Having said that, Facebook has taken multiple steps to assure advertisers and users on their data privacy. Google is following up too with its own set of actions. I feel in the medium to long-term, digital media is only going to grow exponentially especially in a market like India,” said Rajiv Dingra, Founder & CEO, WAT Consult.
As one digital media buyer put it, advertisers are blind to the fallouts of issues like brand safety and data privacy. “Ad fraud and viewability are both measurable. But there is no way to measure the negative impact of data privacy and brand safety at the moment,” he said.
"Marketers don't ask why digital, they instead ask what can we do with digital,” said Vinod Thadani, Chief Digital Officer, Mindshare, South Asia. The concerns over data privacy and brand safety aside, digital is evolving at breakneck speed, forcing marketers to catch up. The frontier where the ad spends now are concentrated is mobile. Facebook’s mobile advertising revenue made up for around 91 per cent of its advertising revenue for the first quarter of 2018, up from 85 per cent in the first quarter of 2017.
It’s all mobile for Facebook. Not really, but nearly there: it’s 91 per cent.
As per the DAN-e4m Digital Report 2018, Search advertising will slow down and spends on this media are only expected to decline over the next three years making way for more social media spends and digital video spends.
While that may be the case, Google is still betting big on Search. Ruth Porat - SVP & CFO, Alphabet, said that she is still excited by the sizable opportunity in search advertising led by mobile. Google recently announced shopping actions that allow customers to buy from their choice of participating retailers on the Google Assistant and Search with the universal card across mobile, desktop and even Google Home.
As part of the earnings call on April 23, Alphabet CEO, Sundar Pichai said that early testing has shown that this new feature is already helping retailers. “Participating retailers see an average increase in basket size of about 30 per cent,” he said.
Google is still excited about Search; developing new tool and features to help retailers.
“It (advertising) continued to be a strong contributor to profitability in Q1. It's now a multibillion-dollar program,” said Brian T. Olsavsky, CFO, Amazon.com at a conference call with investors about the Q1 results. He was beaming about Amazon's $2 bn ad revenue.
For the first time ever, Amazon posted a $2 bn advertising revenue in a single quarter.
The revenue is still nowhere close to the magnitude of giants like Google or Facebook but the growth is strong; it is a growth of 139 per cent over 2017, to be precise.
After Google and Facebook, Amazon is where marketers look to spend their ad monies. Although the movement towards Amazon has been slow in India, Gopa Kumar, EVP, Isobar India, feels that in a couple of years from now, Amazon could be at par with Google and Facebook. This will be mainly driven by the change in consumer behaviour. “People are no more searching on search engines, they search directly on apps and e-commerce platforms like Amazon,” said Kumar.
With the launch of Prime Video, Amazon also has the opportunity to explore video advertising. But Olsavsky said that Amazon will not be exploring that option for the time being.
Amazon is the next big medium for advertisers.
The laggard among social media platforms when it comes to advertising revenue, Twitter registered $575 mn ad revenue this quarter, an increase of 21 per cent year-over-year (YoY.) In a conference call with investors, Ned Segal, CFO, Twitter, noted that ad engagements on the platform are up by 69 per cent and the cost per engagement (CPE) is down by 28 per cent.
Video ads contributed to more than 50 per cent of Twitter’s ad revenue.
Twitter executives noted in the earnings call that the new ad formats, Video Website Cards and Video App Cards, have largely contributed to the strong growth in ad revenue.
Kumar observed that advertisers are back in favour of Twitter advertising because of the various advertising options and new formats that Twitter has developed recently.
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