- Facebook, Google, and Amazon’s Q3 2020 ad revenue growth rates all beat expectations.
- The triopoly noted that direct-response advertisers, especially in ecommerce, are major drivers of growth.
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The three biggest digital ad sellers in the US all posted better-than-expected Q3 2020 ad revenue growth last week, suggesting the US digital ad market is continuing its strong rebound from a major contraction in spending during late Q1 and early Q2.
Worldwide ad revenues at Google were up 6.5% year over year for search, 32.4% for YouTube, and 8.9% for Network Members—all three segments beat our expectations. Facebook ad revenues were up more than 20%, suggesting little impact from the July advertiser boycott. And Amazon reported 49% growth in its “other” segment, which is mainly advertising services, along with strong continued growth in ecommerce sales.
Executives at all three companies noted in their Q3 earnings calls that direct-response advertisers, especially in ecommerce, are major drivers of growth as the pandemic continues to push more activity online:
- Alphabet and Google CFO Ruth Porat mentioned continued strong YouTube ad revenues from direct-response advertisers, plus a resurgence of spending from brands. When asked which verticals were rebounding, she didn’t give much color but suggested growth was broad-based and “basically mirrors what you see in the broader economy.”
- Facebook execs emphasized spending coming from small- and medium-sized businesses, though they didn’t mention a rebound in brand spending. COO Sheryl Sandberg said the ad rebound was driven by verticals including ecommerce, education, and other industries that “lend themselves to online.”
- Advertising doesn’t usually come up much on Amazon earnings calls, but last week senior vice president and CFO Brian Olsavsky reported that “advertising budgets increase[d] from some of the contraction that [had] occurred earlier in Q2,” noting increased traffic to the marketplace. Dave Fildes, head of investor relations, said Amazon’s priorities for the advertising business include making its tools easier to use as well as building out OTT video opportunities.
Google and Facebook execs also discussed—if obliquely—some of the issues that have landed them in the political spotlight in recent months. Google CEO Sundar Pichai and Facebook CEO Mark Zuckerberg both emphasized how much their companies help small businesses, as well as consumers, by connecting them with each other both organically and through ads.
These digital ad players aren’t facing just government regulation, but also new platform rules and changes they say amount to quasi-regulations, including Apple’s upcoming overhaul of the Identifier for Advertisers (IDFA).
Targeting headwinds have come up on Facebook calls regularly for the past several quarters, and last week Zuckerberg and CFO David Wehner said they expected negative effects from IDFA early next year—emphasizing how much the changes would harm developers and small businesses. Amazon’s Fildes didn’t mention the IDFA or cookie-less future, but he did discuss Amazon’s “unique position to be able to provide measurement services” to brands.
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