Quarterly Tech Earnings Show Short-Form Video, Audio Ad Demand Grow

Tech companies recently announced quarterly earnings results, delivering fresh insight into the state of digital advertising and the latest content consumption trends. Overall, the sector reported a mixed bag of gains and losses, as tech platforms navigate inflation and other macroeconomic pressures, looming regulatory oversight, signal loss, and more competition for ad dollars. 

Meta reported declines in revenue and earnings for the second quarter of 2022, the second consecutive quarterly decline in year-over-year ad sales. Revenue for the second quarter fell almost one percent from a year earlier. Daily active users (DAUs) inched higher than anticipated, coming in at 1.97 billion users versus 1.96 billion that was forecasted for the quarter. 

While Meta announced quarterly earnings, the company was inciting controversy over recent changes to Facebook and Instagram. The supersonic growth of TikTok has Meta scrambling to keep up, investing heavily in short-form video, and recently reshaping the home feed and in-app experience across Facebook and Instagram to prioritize viral videos and trending content over updates from friends and family. Pushback from Instagram users was immediate, as celebrities like Kylie Jenner criticized the platform by posting “Make Instagram Instagram Again” on her Instagram Story. Days later, the company announced it would roll back several new features and pause tests for full-screen photo and video posts in the app. 

On the earnings call, Meta founder and CEO Mark Zuckerberg highlighted Instagram Reels has reached $1 billion in annualized revenue, though the product doesn’t yet generate revenue as efficiently as ad investments in Instagram Stories and the Instagram news feed. Instagram Reels now makes up 20 percent of the time people spend on Instagram. Meta reported a more than 30 percent increase from last quarter in the time spent engaging with Instagram Reels content across Facebook and Instagram as popularity in short-form video continues to outpace static content types.

Amazon Online Sales Down, Advertising Up for the Quarter: Amazon saw online sales decline year-over-year for the quarter despite hosting its annual Amazon Prime Day in July. It’s rumored Amazon will host a second mega sale later this year. Meanwhile, Amazon Advertising reported $8.7 billion in ad revenue, up 18 percent from last year. 

Pinterest Cites Economic Climate Will Make for an Uncertain Next Quarter: Pinterest reported ad sales increased nine percent year-over-year to $665.9 million last quarter. In a letter to investors, Pinterest said, “The macroeconomic environment has created meaningful uncertainty for our advertising partners,” as it expects “lower demand from U.S. retailers and mid-market advertisers.”

Snap Highlights Popularity of Short-Form Content: Total time spent watching Snapchat Spotlight content grew 59 percent year-over-year as Snapchat’s more than 347 million daily active users gravitate towards short-form content on the app. 

Roku Sees Scatter Market Sales Decline: According to Bloomberg, “During the latter half of the second quarter, many Roku advertising clients slowed down or altogether stopped buying spots in the scatter market, where companies charge higher rates for last-minute purchases.”

Spotify Earnings Signal Audio Ads Are in High Demand: Spotify advertising revenue grew 31 percent year-over-year for the quarter to surpass $360 million, thanks to strong double-digit music and podcast advertising growth. 

On the other side of the digital advertising duopoly, Alphabet reported last quarter’s earnings and revenue were slightly weaker than analysts expected but still favorable. YouTube advertising faced the most notable decline in ad sales. In total, YouTube ad sales grew five percent for the quarter, a stark contrast to the 84 percent growth seen during the same period last year. In a statement to employees last month, CEO Sundar Pichai said the company will slow the pace of hiring and investments through 2023 as Alphabet is “not immune to economic headwinds.” 

Alphabet didn’t provide a revenue forecast, with CFO Ruth Porat sharing with CNBC that “going forward, the very strong revenue performance last year continues to create tough comps that will weigh on year-on-year growth rates of advertising revenue for the remainder of the year.” Google’s Search and Other revenue topped $40.69 billion, up from $35.85 billion last year, a growth trend largely boosted by travel and retail demand, according to Google Chief Business Officer Philipp Schindler. Google Search continues to be a place for all advertisers to stay invested in, whether they are bearish or bullish about their industry. 

Across earnings reports and analyst calls, tech leaders struck a similar tone in warning of a potential slowdown in digital advertising investments amid economic uncertainty, inflation, and other macroeconomic factors. As companies cut spending and aim to do more with less, recent gains in podcast advertising, short-form video, and record-breaking upfront ad sales commitments for Disney and Comcast are bright spots in this earnings season, demonstrating that advertisers are responding to the current economic climate with agility and testing into new formats and opportunities.