Last week online advertising giants Google and Facebook made one thing clear. While there clearly are victims of the economic crisis wrought by the pandemic, the two online advertising giants should not be counted among them. Both companies released their Q3 earnings late last week, showing continuing strength in the face of a persistent pandemic.
Google also substantially beat analyst estimates, which sent its stock soaring after the earnings announcement.
Alphabet’s Google grew its advertising revenues by about 10%. YouTube was the star, adding more than $1.2 billion to its top line for the quarter. YouTube ad revenue jumped 32.4% to $5.04 billion. Search ads grew by a relatively modest 6.5% to $26.3 billion.
So why is YouTube advertising blowing up? One word. Audience. The video site has more than 30 million music and premium paid subscribers and YouTube TV now has more than 3 million subscribers.
Boycott? What Boycott?
Facebook, for its part, proved what we suspected. The much-publicized ad boycott was largely toothless. Even though companies like Snap and Pinterest claimed their results were bolstered by corporate advertisers fleeing Facebook due it its myriad political controversies. One big reason for this is that Facebook’s diversified ad base is weighted heavily to small businesses. And while SMBs are hurting, they are also less likely to be swayed by “brand safety” concerns.
There is another reason small-businesses stick with Facebook. As COO Sheryl Sandberg said herself on last week’s earnings call, “Small businesses can’t afford the broad, mass marketing campaigns that big brands can…For many small and medium-sized businesses, personalized advertising – which uses data safely and in a privacy-protected way – is the secret ingredient that makes their success possible.”
So small businesses are fairly dependent on the Facebook platform to reach new customers efficiently. This makes it unlikely that SMBs will be joining a boycott any time soon.
The Q3 numbers suggest that Pinterest’s and Snap’s gains were not so much at Facebook’s expense.
For the quarter, Facebook’s ad revenues jumped 22% to $21.2 billion.
Other non-financial metrics were also strong for the social media giant. For example, daily active users (DAUs) jumped 12% in September, to 1.82 billion. Monthly active users (MAUs) also jumped 12%, to 2.74 billion. I mean, the entire world only has 7.6 billion people. Facebook was also a job creator during the quarter, adding 32% to its headcount year over year.
Snapback from Q2
Both companies posted results that showed substantial improvement over Q2. Then even Facebook and Google were not immune to the bloodletting caused by the pandemic’s peak in the spring. For example, Facebook’s Q2 ad revenues only grew by 10% in Q2. And Google’s search ad revenues fell by nearly 10%. YouTube was again the bright spot, posting a 6% bump in ad revenues in Q2.