What were some of the top stories from the world of marketing and video? Each week with Render Perfect Productions, your video marketing experts in Baltimore and beyond, we’ll take a look at marketing news this week. In this edition, we are covering some of the top stories from the week of April 25th to April 29th 2022.
YouTube Underperforming
- Google parent Alphabet saw revenue rise 23% year-on-year to $68.01 billion in the first quarter, according to an earnings statement. The results fell short of Wall Street’s expectations.
- A glaring weak point was YouTube. The video-sharing platform grew revenue 14% YoY to $6.87 billion. Analysts had forecast growth of around 25%.
- Multiple factors, including the war in Ukraine, rising inflation and bumpiness adjusting to changes in Apple’s tracking features, have affected marketer spend. YouTube’s drop-off is severe enough to show some brands may also shift their digital video budgets to other platforms.
YouTube has been a prized segment for Alphabet during the pandemic, as people spend more time watching videos online. The video platform grew revenue 25% to $8.6 billion in the fourth quarter of 2021, a strong upward trajectory analysts expected would continue into the early stretch of this year. That scenario clearly hasn’t played out, as the service dragged down what was an otherwise healthy period for the technology giant.
Google’s core search and other revenue breakout was up 24% YoY to $39.61 billion in Q1. Retail has continued to buoy search as marketers try to wed their digital advertising and commerce initiatives closer together. Many businesses have also started migrating away from Meta Platforms’ Facebook and Instagram as privacy changes Apple implemented last year impact campaign performance and measurement. Meta reports its earnings later today (April 27).
Google previously seemed to weather Apple’s adjustments, which are part of the iPhone maker’s App Tracking Transparency (ATT) framework and have made keeping tabs on users for advertising more difficult, relatively well. However, those challenges, coupled with an overall more volatile ad environment, are standing up larger obstacles for digital media sites like YouTube.
On a call discussing the Q1 results with analysts, Alphabet Chief Financial Officer Ruth Porat stated ATT has led to ongoing headwinds that have primarily hit direct response advertising, though she noted that “the dollar impact from ATT has been consistent since it was implemented in April of last year.” The executive also said the ongoing war in Ukraine carried an “outsized” impact on YouTube in relation to the company’s overall ad business. About 1% of Google revenues were derived from Russia in 2021, per Porat. The firm has suspended most of its operations in the country in response to the invasion.
Regardless of many macroeconomic disruptions — inflation was also called out — YouTube is contending with stiffer competition in mobile video than it has before. TikTok is the fastest-growing app on the market and has successfully won the minds and attention of key young consumer groups like Gen Z. Insider Intelligence forecasts TikTok’s ad revenue will triple to $11.64 billion in 2022, more than Twitter and Snapchat combined.
YouTube is standing up its own TikTok styled offering called YouTube Shorts. The short-form video portal now generates 30 billion daily video views, four times higher than the audience it drew a year ago, Alphabet CEO Sundar Pichai said.
Monetization for shorts is a work in progress. YouTube last year rolled out a $100 million Shorts fund to encourage more creators to use the feature. Over 40% of creators who have received payments through the program in 2021 weren’t part of YouTube’s larger Partner Program for creators, a data point Chief Business Officer Philipp Schindler called “interesting.”
Facebook sees User Count Grow
- Meta Platforms’ ad revenue grew 6% year-on-year to $27 billion in the first quarter, according to an earnings statement. Total revenue was up 7% YoY to $27.9 billion.
- Daily active users (DAU) on the core Facebook app were up 4%, or by 82 million, to 1.96 billion. That marks a turnaround from the prior period, when DAUs declined for the first time in company history. Shares jumped on the news, despite Meta missing Wall Street’s revenue targets and offering a patchy outlook for the second quarter.
- Meta is contending with several headwinds that will continue to dog growth, including Apple’s App Tracking Transparency (ATT) framework. The technology giant is narrowing the number of investment areas it is focused on in response, prioritizing bets on short-term video, improving ad infrastructure and the metaverse.
Meta’s flagship app didn’t continue to shrink on a user basis in Q1, which appeared to be a positive enough development for the markets. The company’s broader ad business, however, is still undergoing a rocky transition as it contends with ongoing challenges from ATT and volatile macroeconomic factors, like the war in Ukraine. Russia has blocked the company’s services and Meta ceased accepting ads from Russian advertisers globally earlier this year.
Looking ahead to Q2, Meta’s projections weren’t exactly rosy. Total revenue is expected to land in the $28 billion to $30 billion range. The lower end of that forecast would mean Facebook recording its first year-on-year revenue drop ever, as noted in CNBC.
Discussing the Q1 results with analysts, executives suggested that there aren’t many short-term solutions to Meta’s advertising problems. How leadership plans to tackle these challenges seems to narrow.
Addressing Meta’s disappointing fourth-quarter report, CEO Mark Zuckerberg outlined seven areas of investment to prioritize. For the Q1 call, he called out three: Reels, a TikTok lookalike; Meta’s ad infrastructure, including doing more with less user data and greater applications of artificial intelligence; and the metaverse, particularly through the Horizon Worlds offering. Less energy seemed to be put toward e-commerce, which has experienced a slowdown after booming earlier in the pandemic. E-commerce performance on Facebook has also been affected by ATT since it was implemented last year.
On the Reels front, the feature is attracting eyeballs. Instagram users now spend 20% of their time with the short-form video format, and it’s gaining traction on the big blue app as well. Video commands 50% of the time people spend on Facebook, according to Zuckerberg.
But monetization is very much in development for Reels, and executives compared the progress to that of Stories, the disappearing image format that brands eventually came to favor on Instagram. Chief Operating Officer Sheryl Sandberg said Reels would be a “multiyear journey like Stories.”
“In the near term this is a drag on revenue because Reels monetization is less than feed or stories, but I expect that will improve over time,” Zuckerberg said.
Meta is ramping up its Reels investments as TikTok continues to see its star rise with consumers and advertisers. Insider Intelligence expects TikTok’s ad revenue will triple this year to $11.64 billion.
Meta’s next priority with the metaverse is to grow a bigger community. The company aims to launch a web version of Horizon Worlds later, in 2022, that will make the service more accessible and not require a special headset.
Brands have experimented more with the platform that tries to blend aspects of the real and digital worlds. Wendy’s in March ran a “Wendyverse” campaign where visitors could explore a virtual restaurant in Horizon Worlds. It reached 52 million users, per Sandberg, and improved Wendy’s brand and message awareness across several metrics, though those weren’t broken out.
Laying the groundwork for the metaverse remains a costly endeavor. Reality Labs, the Meta division that oversees its augmented and virtual reality bets, posted an operating loss of $3 billion in Q1.
Meta’s forecast for how much ATT will affect revenue in 2022 remains unchanged. The projection, which is “not a precise point estimate,” per executives, is a $10 billion hit.
Snapchat Shares Insights for Brands to Connect with Customers
A few years back, when Meta copied Snapchat’s Stories format, and made it into its own on Instagram, it seemed like Snapchat was going to struggle to remain relevant in the developing social media landscape.
But Snap stuck to its guns. It doubled down on its key use case in connecting friends, and it continued to develop its still industry-leading AR tools and features, which has enabled Snapchat to both maintain relevance, while also building the foundations for a stronger future.
And now, that connective capacity has it well-placed to boost its appeal to ad partners, with its focus on joy and positive engagement facilitating new opportunities.
Just this week, Snap showcased its latest AR tools for commerce, and how its AR ad options are developing, and based on these insights, they could well provide major benefits to businesses looking to connect with the Snap audience.
Though Snap remains primarily a younger audience app. Users aged between 18 and 24 make up 39% of Snap’s total audience, while Snap now claims to reach over 75% of 13-34-year-olds in over 20 countries.
But over time, inevitably, Snap’s audience is getting older, and if the platform can grow with its user needs, that could see it well-placed to become an even bigger advertising consideration over time, while its AR development could also ensure that Snap is well-placed to capitalize on its opportunities.
These figures further underline its potential here, and it may well be worth giving Snap some more consideration for your future ad campaigns.
Instagram Expands Testing of 90 Second Reels
Instagram first began testing longer Reels in February, with various users seeing the option appear in the app ever since. We asked Instagram if this update was being rolled out to all users, and they told us that, at present, this is only in testing, with no official plan for a broader expansion just yet.
Instagram’s currently in the process of re-aligning its video offerings around the Reels format, with Instagram chief Adam Mosseri noting back in December that:
“We’re going to double-down on our focus on video and merge all of our video formats around Reels”
Instagram retired its IGTV brand back in October, when it announced the broader merger of its video offerings, and with this, it makes sense for the platform to also make Reels longer, in order to better integrate its various video offerings into a singular content stream.
Worth also noting that in its latest earnings call, Meta reported that Reels now makes up over 20% of the total time people spend on Instagram, underlining the popularity of the format – even though it’s a direct copy of TikTok.
The next step will be to reduce the length of all video uploads (users can still upload video clips up to an hour long through the post composer), which will bring everything into greater alignment, in order to facilitate the next stage of Instagram’s content shift.
Worth noting, too, that Instagram removed it’s in-stream video ad placements option earlier this month, which also aligns with this broader push towards making video content more compact, and translating all of its content into a full-screen, immersive, TikTok-like feed, moving into line with emerging habitual behaviors.
Instagram hasn’t shared any info about this next stage, but that seems like the logical conclusion, which will be a big change for the app, though one that makes a lot of sense.
Longer Reels is another step in this, and while it’s not being made available to everyone just yet, it is gradually being expanded to more users over time.
About Render Perfect Productions:
Render Perfect has been built from the ground up to service growing businesses and help them realize their full visual storytelling and digital marketing potential. We’ve created a service offering and skill-set that spans video production, post-production, motion graphic design, 3D animation, web development, and video marketing strategy. Our insight and experience allow us to help clients make better planning decisions and get more out of their video production effort.
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