Earnings results from
Facebook, Twitter and Pinterest Thursday built on momentum established by Snap
and suggest bigger bets on areas like e-commerce are paying off.
Peter
Adams@PatchAdams03 Oct. 30, 2020
Social media companies
Facebook, Twitter and Pinterest posted blowout revenue gains in third-quarter
earnings released Thursday, a sign that disruptions related to the coronavirus
pandemic have cooled and that marketers again are spending at higher levels.
The strength of these companies' performance — mirrored in other Big Tech
platforms like Google and Amazon, which reported earnings concurrently —
signals that digital advertising has broadly fortified its position of
dominance in the media market while traditional channels like linear TV
flounder amid the health crisis.
Even in a category known
for notching hefty growth figures, Thursday's batch of earnings stands out.
Facebook saw ad revenue jump 22% year-on-year to
$21.47 billion for the period ended in September, a windfall for a company that
just months ago was mired in a widespread advertiser boycott. Pinterest, which
has seen activity rise with the pandemic, reported revenue grew 58% YoY to $443 million, along
with record user growth. Twitter, recently bogged down by problems related to its ad-targeting tech,
shared disappointing user statistics, but emphasized returning advertiser
demand: Ad revenue was up 15% YoY to $808 million and total
engagements with ads spiked 27%.
Taken together, the
blockbuster results contribute to a momentum previewed by Snap last week, with
the Snapchat owner experiencing a revenue surge of 52% YoY to
$678.7 million for the period. An open question is whether the platforms can
keep the ball rolling as COVID-19 continues to spread throughout the U.S. and
as new regulatory challenges, including those around data privacy, loom on the
horizon.
New
bets pay off
Social media usage has
generally climbed among locked-down consumers who are looking to stay
connected, but that hasn't always translated to a revenue bump as many
advertisers tightened their budgets at the pandemic's onset. As brands and
users adjusted to the health crisis through Q3, media taps turned back on, and
platforms quickly built out features to accommodate business needs around
navigating COVID-19.
Facebook, for example,
has introduced a wide array of e-commerce integrations across
its core social network, Instagram and WhatsApp in a bid to help
small businesses make the shift online. Facebook Shop, an online storefront that rolled out in
the second quarter, has seen pleasing progress, Facebook Chief Operating
Officer Sheryl Sandberg told investors on a call discussing the
Q3 results. The offering expanded to WhatsApp last week.
"Big companies can
afford to buy broad-based ad campaigns that hit countries or whole geographies.
Small companies can't. So survival, and the economic growth and the increasing
ability to stay afloat and hire has really been driven across the board
by SMBs," Sandberg said on the call.
"Now some verticals have experienced more of this. Certainly, e-commerce is the leading example, but there are a lot of other businesses that also lend themselves to online," she added.
Other platforms, like
Twitter, benefited as cultural conversations turned back up again in Q3 with
the return of live sports and other destination viewing events that were
curtailed in the early days of COVID-19. Stronger engagement with ads helped
Twitter offset flagging user growth, as monthly daily active users (mDAUs) only
increased by 1 million over the period, putting the platform's total audience
at 187 million mDAUs.
"Advertisers were
waiting to spend on Twitter and they all came back to the platform with the
return of live events," eMarketer analyst Nazmul Islam
said in emailed comments. "We expect Twitter to continue to be attractive
for brand advertisers and they're on the path to add more direct [response]
advertisers as well."
Meanwhile, Pinterest
rounded out its product suite to center more on areas like shopping and
spotlighting smaller creators and businesses. The company, which resists the
social media label to instead position itself as a destination for inspiration
and ideas, has also made a concentrated push to promote well-being and tamp down on toxic content. A more proactive
stance on brand safety potentially bolstered Pinterest's appeal at a time when
rivals like Facebook faced intense flak for their
failure to take down hate speech, which led to a wide-ranging advertiser
boycott of social media over the summer.
"[Pinterest] is the
social platform of positivity, and its record growth in user engagement was
sustained throughout Q3 and will only continue to build in Q4," Carly
Carson, social director at agency PMG, said over email. "The platform
capabilities mentioned in the earnings call, including its
newest shoppable ad partnerships, are coupled with more advanced
bidding capabilities, which in turn, have driven incredible media efficiencies
for brands."
Headwinds
ahead
If Q3 represented a peak
for the social media category, the next few months could represent a comedown.
Though a holiday season impacted by COVID-19 will likely benefit companies that
have integrated more e-commerce functionality, and result in a sturdy fourth
quarter, more serious existential threats are speeding down the pike in 2021.
Data privacy regulations,
including the California Consumer Privacy Act, continue to affect the digital
advertising ecosystem, while antitrust scrutiny of Big Tech is ramping up both at home and abroad. Facebook potentially
faces an antitrust lawsuit akin to the one that hit Google earlier this month,
with The Wall Street Journal reporting the Federal Trade Commission could file a complaint by
year's end.
Planned changes to
Apple's privacy policies will also have a considerable impact on both mobile
platforms and marketers. The iPhone maker will soon require apps to ask for
opt-in consent from users to access its Identifier for Advertisers (IDFA), a
randomly generated code assigned to the company's devices. It's a development
that has sparked controversy, leading Apple to push back the original
implementation date to early next year. A delay softens the blow for Q4, but
casts a shadow over the start of 2021.
"[IDFA's] going to
have a disproportionate impact on app installs and thus, our audience
network," Facebook Chief Financial Officer David Wehner said on
the call with analysts. "And so that's obviously a big challenge for app
developers who are looking to grow their business in what is a difficult time.
"We're looking at
various options, but our best view is that there's — there are going to be
significant headwinds next year as a result of these changes, specifically on
iOS14," Wehner said.
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