Q3 Ad-Buying Rebound Bodes Well For Holiday Sales
The latest earnings reports from Big Tech giants and social media platforms show that advertising spend is through the roof at present, after basically falling off the roof earlier this year. Are media buyers burning through budgets at the last minute just to preserve them for a better shot next year, or will the ad rebound collectively help recoup 2020 losses with holiday sales?
What exactly is playing out is a bit of a poser, but the news itself points to something big.
Google parent Alphabet Inc. did strong Q3 numbers, with PYMNTS reporting that “Alphabet said search and other advertising revenues rose 6 percent year over year to $26.3 billion in the quarter as advertiser spend began to pick up in August. Network ad revenues rose 9 percent year on year to $5.7 billion, while ad sales at YouTube shot up 32 percent to $5 billion.”
Snapchat blew past analysts’ expectations, logging revenues of $678.7 million, up 52 percent year on year, with a daily active user (DAU) base of 249 million, up 18 percent. As Business Insider reported: “Like many tech companies, Snap relies on revenue from brands, whose pandemic-related financial slowdowns were expected to have a domino effect on ad buyers. However, digital ad spending has since started to trend back up across the board, boosting the revenue of social networks,” and adding that, “social-distancing guidelines and stay-at-home orders have helped to boost consumer tech’s usage numbers. Snap added 39 million DAUs globally.”
Earlier in October, Snapchat VP of Americas Peter Naylor told CNBC, “We’re feeling a lot of momentum, particularly around what I call accountable ads, you know, performance-oriented ads, because advertisers do want to get back and they are getting back into the groove. They have to drive their businesses, and advertising drives their businesses.”
Agencies, Apps Ride the Resurgence
Other financials paint a similar picture. At Pinterest, “third-quarter (Q320) revenue spiked 58 percent year over year to $443 million, with global monthly active users (MAUs) reaching 442 million, a 37 percent year-over-year increase,” PYMNTS reported on Oct. 29. Pinterest CFO and Head of Business Operations Todd Morgenfeld “credited the surge in part to factors like a rebound in advertiser demand, positive return on investment (ROI) from advertising products and expansion to other parts of the world.” Pinterest began picking up advertisers in recent months, possibly a windfall from advertiser boycotts at Facebook earlier this year.
Optimism is returning to the agency world as well, with major holding companies, including WPP, talking about the increasing ad spend. “Advertising giant WPP is showing signs of recovery in Q3 after clients cut spending in the midst of the COVID-19 pandemic, according to The Wall Street Journal,” AdExchanger recently wrote. “WPP reported $3.84 billion in sales in the third quarter, beating expectations,” according to FactSet, adding that “WPP CEO Mark Read … said that growth happened as clients want more performance.”
Also benefitting from the ad uptick is Microsoft, with The Street noting that “Microsoft reported stronger-than-expected LinkedIn revenue growth thanks to a 40 percent increase in LinkedIn’s Marketing Solutions (ad) revenue. Microsoft did also report a 10 percent drop in search ad revenue (weak ad spend in verticals such as travel and hospitality remains a headwind), but that was a little better than Q2’s 18 percent drop.”
Even Facebook, with its advertising boycott turning out a boost for other brands in the space, saw its ad revenues jump in the latest quarter. “The social network reported on Thursday that its revenue for the third quarter had risen 22 percent from a year earlier, to $21.2 billion, while profits jumped 29 percent to $7.84 billion. The results surpassed analysts’ estimates of $19.8 billion in revenue and profits of $5.53 billion, according to data provided by FactSet,” The New York Times reported this week.
Targeted In-App Ads Grow Geometrically
The Facebook family, comprised of Instagram, Messenger and WhatsApp, may be the true bellwether as the ad spending story of 2020 writes its final chapter.
Per New York Times reporting, the social media titan’s core users are up 12 percent from a year earlier, with more than 1.82 billion people on the app daily and 15 percent across all apps.
“We had a strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times,” said Facebook’s Founder and CEO Mark Zuckerberg, as reported by The Times. “We continue to make significant investments in our products and hiring in order to deliver new and meaningful experiences for our community around the world.”
As to what the massive spend is meant to accomplish, that’s easy: holiday sales to help make up losses from the worst year ever, even for businesses that survived 9/11 and the 2008 crash.
PYMNTS reported in late October that “WARC Data’s Global Advertising Trends report found that brands worldwide will put $58.6 billion toward online shopping advertising” through the end of 2020.
“Marketing on sites such as Rakuten and TikTok is forecasted to rise 18.3 percent globally,” PYMNTS wrote in September, “surging 30 times quicker than the broader digital advertising market,” as reported by MediaPost. GfK determined that nearly half — or 44 percent — of almost 1,000 American consumers polled anticipate purchasing only through eCommerce channels during the holiday season. Approximately two in 10 — or 17 percent — indicate they will shop only in physical retail stores.