COVID helped drive record ad revenue for big tech in Q3

Facebook, Google, and Amazon experienced significant sales growth during and in part due to the pandemic.

Several tech companies announced their quarterly results on the same day last week, including Apple, Google, Amazon, and Facebook. Apple is the only company in the “antitrust quartet” that does not formally report advertising revenue, although third-party estimates say Apple could earn $ 2 billion from search ads this year. Google, Facebook, and Amazon have all seen significant growth in ad revenue, especially against the backdrop of (or possibly due to) COVID-19 and advertising budget pressures.

Double-digit ad growth

Perhaps Amazon is the main beneficiary of COVID-19, the e-commerce site of millions of US consumers during the pandemic. The company recorded gross sales of more than $ 96 billion, representing 37% year-over-year sales growth. Advertising makes up most of what is reported in the company’s income statement as “other” income. It reached about $ 5.4 billion, up more than 50% in the annual comparison.

Google generated just over $ 46 billion in total revenue and $ 37 billion in advertising revenue. Paid search contributed $ 26.3 billion, while YouTube grew $ 5 billion, 6%, and 32% year-on-year, respectively.

Facebook generated $ 21.5 billion in revenue in the third quarter, nearly 99% of which came from advertising spend. Over 90% of this revenue comes from mobile user engagement. In terms of revenue, Facebook said it now has 10 million active advertisers, most of whom are small businesses. That means 9 million advertisers in the second quarter.

As a result, Facebook’s StopHateForProfit advertising boycott appears to have had little or no impact on the company’s revenue, up 22% from the previous year.

COVID-driven commerce

Other tech companies, including Shopify, also made a profit on October 29. Shopify grew 96% year-over-year, exceeding investor expectations. Another big advantage of COVID’s online stores is that the company is the solution for small businesses and others who want to go “commercial” during the pandemic. But Google and Facebook were equally focused on e-commerce.

In its earnings report, Facebook discussed the migration of online shopping during the pandemic. It says “online commerce is our biggest vertical ad” and discusses how a return to the norm could negatively impact e-commerce advertising in 2021. Not long ago, the company launched stores on Facebook and Instagram. Buy on Instagram and Facebook. , launched. Shopping Guide.

Social commerce will continue to be an important growth channel for online shopping in 2021. Pinterest, Snap, YouTube, and TikTok also play an important role in this segment.

Separately, Google and Amazon have a long battle for product dominance. Google recently took a number of steps to strengthen its competitive position with Amazon (e.g. free product listings, product stock ads in the area). But when necessary, as in defense of antitrust claims, Google points to Amazon’s dominance in the store and looks for evidence that it doesn’t have a monopoly on search or advertising.

In addition to product research, Google CEO Sundar Pichai said in passing during the company’s earnings that YouTube is an important platform for eCommerce. However, he warned that the transmitter was still in its infancy.

Concentration of expenses

The economy is still volatile, although GDP growth continued into the third quarter. The plan, as far as we can call it, was not evenly distributed. Small businesses suffer the most. Revenue from major technology platforms and some others are generally not representative. However, this is indicative of trends in the broader advertising ecosystem.

To put third-party ad revenue from Google ($ 37 billion), Facebook ($ 21 billion), and Amazon ($ 5 billion) into perspective, even companies targeting the next level of advertising – Snap, Pinterest, and Twitter – didn’t make any profits, but together their advertising revenue is less than $ 2 billion:

• Snap: $ 679 million (+ 52% YoY)

• Pinterest: $ 442 million (+ 58% per year)

• Twitter ad revenue: $ 808 million (+ 15% YoY)

Just as the US economy has disappeared more and more over time, with winners and losers, so too has the online economy with a growing concentration of revenue and control over ad spend. This is what the recent report of the antitrust subcommittee of the judiciary maintains.

According to PricewaterhouseCoopers, the Internet is the largest advertising medium in the United States, more than $ 50 billion more than the second-largest medium (television). Now we are in a great party or hunger environment, enriched by COVID, where the money comes in. Almost exclusively for large platforms; they have a large audience and are safer for marketers. The IAB reported in 2019 that the top 10 internet companies own about 77% of digital revenue, up from 76% in 2018. This one-point gain may not seem like much, but in real dollars, it represents $ 14 billion in distributed revenue. 10 different companies.

In 2020 it will be even bigger.

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