Amazon reported a record Q3 that was driven in part by a 51% increase in advertising revenue and buoyed by a surge in ecommerce due to the COVID-19 pandemic.
The online retail giant’s accelerated push into advertising netted $5.4 billion in revenue – up from $3.6 million a year ago – with the company telling investors on its earnings call Thursday that it remains focused on making its tools easier to use and developing new products to serve brands. These developments will impact livestreaming gaming platform Twitch and entail a greater push into video.
The strong earnings were released shortly after its Prime Day event earlier this month to kick off the holiday shopping season.
Amazon doesn’t specifically break out advertising revenue figures, though most of the $5.4 billion Amazon earned in its “Other” business category is tied to advertising.CFO Brian Olsavsky told investors that the Q3 ad growth rate was a continuation of Q2 trends.
“We start to see advertising budgets increase from some of the contraction that has occurred earlier in Q2,” he said. “We just had a lot more traffic, and we do a good job of turning that traffic into valuable real estate for our advertisers and for our customers to find out more about selection and brand discovery. It was a strong quarter in advertising, and that's what you're seeing in the other revenue line.”
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“The Sell Sider” is a column written for the sell side of the digital media community.
Today’s column is written by Alessandro De Zanche, an audience and data strategy consultant.
I recently had the opportunity to dive deeply into how media owners approach the diversification and the coexistence of business models built on audience, data and monetization strategies.
It was a privileged observation point, where I engaged with a group of medium-size publishers at the early stages of diversifying their business models. The background of it was a program run by FT Strategies, the consulting arm of The Financial Times, which has built a very successful subscription strategy.
Watching the media owners enthusiastically learn about the Financial Times’ subscription strategy and listening to their everyday challenges reinforced my conviction that positive change can only happen if publishers break down their organizational silos, way before deploying any specific data strategy.
Many publishers strive to achieve a “single customer view” with their data strategies, but it is not only a concept of data architecture that they should focus on – they must also consider the strategic and practical way the whole company should look at their customers.
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Risky Business
Publishers got pummelled by the pandemic, and advertisers nervous about brand safety (and their overzealous blocklists) were at least partly to blame. With that in mind, the IAB Tech Lab accelerated the rollout of its Content Taxonomy 2.2 this week to help third-party verification vendors avoid problematic content without hampering a publisher’s ability to monetize. The updated framework, which was co-developed by the Global Alliance for Responsible Media, defines 11 sensitive content categories, including explicit sexual content, hate speech, terrorism, obscenity and sensitive social issues. Consider those a brand safety “floor.” By defining the worst of the worst, advertisers will have more control over their ad buys and can be more nuanced about what topics they advertise against, said Amit Shetty, senior director of product at IAB Tech Lab. By the same token, pubs can monetize more of their content that’s outside of the sensitive categories outlined in the framework. As part of the new taxonomy, the Tech Lab created four risk levels that can be used to identify a range of brand suitability: a floor as the baseline followed by high, medium and low risk levels. Read the release. The taxonomy is open for public comment until Nov. 27.
Ecom Is Da Bomb
Brick-and-mortar sales will be down this holiday season – no surprise there – but ecommerce is expected to more than make up the difference. Although in-store sales will decline by 4.7% to nearly $823 million, US consumers will spend just over $190 billion this year on holiday ecommerce purchases, up 35.8%, as per eMarketer. That’s $50 billion in incremental sales compared to 2019. All told, total holiday sales will ring in at $1 trillion, representing 0.9% growth for the total holiday season sales. Adobe predicts that online sales will surpass $2 billion every day between Nov. 1 and Nov. 21 and increase to $3 billion a day from Nov. 22 to Dec. 3. “This year is unlike any in the past, and for the first time we are no longer referring to peak holiday sales as Cyber Week,” said John Copeland, head of Marketing and Customer Insights at Adobe. It’s now Cyber Month.”
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Although Snap and Pinterest say they benefited revenue-wise from the Facebook boycott over the summer, Facebook barely felt a ding.
Advertising made up nearly all of Facebook’s revenue in the quarter – $21.2 billion of $21.5 billion overall, a 22% year-over-year increase.
And Facebook now has more than 10 million active advertisers across its services – which represents mega growth. That number is up from roughly 8 million advertisers in January. The majority are small and medium-sized businesses.
“The acceleration in revenue growth from Q2 to Q3 is largely driven by strong advertiser demand and the accelerating shift from offline to online commerce that we saw in connection with the pandemic,” Dave Wehner, Facebook’s CFO, told investors.
Average revenue per user in the United States and Canada in Q3 was $39.63, up from $34.55 YoY.
But there are headwinds coming in the form of an evolving regulatory landscape, continued uncertainty to do with transatlantic data transfers and coming platform changes, particularly on Apple’s iOS.
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Google printed more money during its Q3 2020, with $46.2 billion in revenue, up 14% YoY. Most of that was from search, which netted $26.3 billion in Q3. YouTube advertising was $5 billion.
In total, Google’s Q3 ad revenue was $37 billion.
What’s driving that growth?
After a deceleration in the second quarter, Q3’s revenue boost is thanks to, in the words of CFO Ruth Porat, “Broad-based increases in advertiser spending in search and YouTube, as well as ongoing strength in our non-advertising revenue lines, in particular Google Cloud and Play.” Porat added that advertiser spend started to pick up in August.
Very cool. So it’s back to pre-COVID levels or …?
Porat skipped that part when asked, simply stating: “Overall, we’re pleased at the degree to which advertisers have reactivated their budgets in the third quarter. They’re reacting in part to consumers showing strong demand across all verticals.”
Does that include travel? Because eMarketer expects Google’s revenues to decline due to the loss of travel.
Porat glossed over that question too, saying, “We don’t break out more than that, but [growth in ad spend] was quite broad-based.”
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The quest to figure out the future of online identity continues. Between Google’s birdcage and the indie ad tech solutions under development, a lot of smart minds are coming together to try and solve the problem with their own twist.
But could these solutions end up creating new privacy challenges? One underreported problem is the potential threat of a new form of data leakage. As CafeMedia’s Paul Bannister – making his third appearance on The Big Story – points out, intermediaries are nothing if not adept at finding new opportunities to scrape publisher data.
In this week’s show, Paul outlines how Google’s FLoC of TURTLEDOVES might be good for consumer privacy while simultaneously overexposing publisher data. He’ll also explain how the email-based identity resolution solutions that are starting to emerge from the ad tech industry (see: The Trade Desk and LiveRamp) also open up the possibility of further data leakage.
And speaking of The Trade Desk and LiveRamp, the two have formed a partnership whereby the Unified ID 2.0 being spearheaded by TTD will integrate into the latter’s Authenticated Traffic Solution.
What does that improbable sentence even mean? Allison Schiff will break it all down.
Scaling your marketing ops isn’t an easy task when you’ve got 60 million monthly active users and a massive store of historical data going back nearly two decades.
Just ask Pandora. “It’s been a really big challenge for us,” said David Hassler, director of software engineering at the music streaming platform.
For the past two years, Pandora has been working with ActionIQ, a customer data platform that focuses on enterprise customers.
On Thursday, ActionIQ released the second generation of its CDP centered on an offering called InfiniteCompute, which allows clients to dynamically scale their data activation based on need.
ActionIQ first started developing the software around three years ago. It’s now generally available after nearly a year in beta.
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If Donald Trump owned H1 for programmatic ad spending, Joe Biden is dominating the second half of the year.
After spending big on display and native during the first half of 2020, the Trump campaign scaled back precipitously on programmatic starting in August, down to nearly zero in September, and has kept its foot on the brake since, according to data from ad analytics company Adomik.
But August is when the Biden camp pushed the petal right down to the floor on programmatic, especially with regards to online video.
Biden bets on video
If Biden was a brand, he would have been the top spender on video in August ahead of Microsoft, Sony, Amazon and pharmaceutical company Sanofi, as per Adomik.
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Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here.
Unified
Criteo and The Trade Desk might be competitors by day, but the future of identity, privacy and the open internet calls for collaboration. The day after TTD partnered with LiveRamp on the Unified ID 2.0 initiative, Criteo said that it too will lend a hand. Unified ID 2.0 is an effort being spearheaded by The Trade Desk to devise a replacement for third-party cookies by using encrypted email. Read the release. But there’s a missing piece: the consumer-facing UI. And so Criteo has signed on to help develop the sign-on solution and transparency portal that will support Unified ID 2.0. The portal will give consumers control over their advertising experience and the ability to opt in – or out – of data sharing, both key concepts underpinning the new open source ID. Criteo’s contribution to Unified ID 2.0 will also incorporate elements of its own homegrown User-Centric Ad ID solution, which includes a revocable identification system. In other Criteo news, the company reported earnings on Wednesday, with revenue of $470 million ($186 million minus traffic acquisition costs). Criteo CEO Megan Clarken emphasized the company’s commitment to its retail media business, which she called “a central piece” of Criteo’s commerce media platform.
Antitrust Complaint Du Jour
Les hackles are up. A group of French trade organizations, including IAB France and the French arm of the Mobile Marketing Association, filed a complaint against Apple on Wednesday over the forthcoming privacy changes it’s making to its iOS ecosystem. At issue is the fact that, starting next year, publishers and developers will be required to collect consent before using Apple’s proprietary device ID. The companies behind the complaint, which was lodged with France’s competition authority, argue that few companies will agree to tracking and this will make it extremely difficult for publishers to sell the personalized ads they’ve come to rely on for their revenue. (Oh, and the middlemen would be SOL, too.) If the government pursues the case, it would represent one of the first legal challenges to online privacy measures on antitrust, according to The Wall Street Journal. “This is a novel case – a truly important case – because it deals with the use of privacy as a sort of fig leaf for anticompetitive conduct,” said Damien Geradin, the competition lawyer representing the coalition of industry groups.
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