We’ve now seen Q2 results from Snap, Twitter, Facebook, and Google, which gives us a good sense of how COVID has impacted the online advertising industry. Unlike Q1, which was largely over before shelter-in-place orders kicked in, Q2 occurred entirely during the economic upheaval caused by the pandemic.
In mid-July, we reported results from two lesser yet significant players. Snap and Twitter.
Twitter’s ad revenues declined by 23% while its user base grew by 34%. This means that Twitter is not just seeing its revenues decline, but that it can’t effectively monetize a growing user base. These contrasting metrics added pressure on Twitter to consider a subscription business model, which the company says it will test this year.
Snap fared better than Twitter. Its Q2 revenues of $454 million were up 17% over Q2 2019. Snap also reported a 17% rise in active daily users to 238 million. This fell just shy of analyst estimates. And Snap’s Q2 net loss grew 28% to $326 million year over year. Still, these results didn’t please investors, who didn’t appear ready to cut Snap any slack because of COVID.
Fast Forward to Facebook and Google
Facebook‘s Q2 revenues grew by just 11% to 18.7 billion. It’s ad business, which dominates its revenue, grew by 10% to $18.3 billion. Its other revenues were up 40% to $366 million. This would be a greater quarter for another large company. For Facebook, that’s a rounding error.
While the results are still positive, the show the impact of the pandemic. In Q2 2019, Facebook grew its overall revenues by 28%. Revenues were up 17% in Q1 2020, reflecting the beginnings of the pandemic’s impact.
Alphabet (Google’s parent company) fared worse than Facebook in Q2 and actually saw its advertising revenues decline.
Google’s overall revenues dropped 2% in Q2 to $38.3 billion. Google Search revenues dropped 9.8% to $21.3 billion. YouTube ads, on the other hand, were up 6% to $3.8 billion. YouTube’s success was attributed to strong direct response advertising.
By contrast, Google grew 19% in Q2 2019.
Google’s ad business fared far worse than Facebook. Yet it’s worth noting that Google is less depending on advertising. Google advertising (including ads on network member properties) comprised 78% of Q2 results. At Facebook, ads represented 98% of revenue.
A notable contrast between Facebook and Twitter is the former’s superior ability to monetize its users. This in many ways tells the story of Facebook’s success and Twitter’s comparative failure.
Facebook grew its monthly active users by 8% in Q2, while growing ad revenue by 10%. Twitter, as noted, grew its user base by 34% while revenues fell by 23%. Twitter’s inability to convert users into revenue suggests it is falling further behind its much larger rivals. If this trend continues, a business model pivot may be inevitable.