What paid social advertisers can learn from Meta, Snap and Pinterest’s Q1 reports
James Mortimer of digital marketing agency iCrossing UK makes his quarterly journey into the earning reports of the big social players, highlighting what marketers should prepare for in Q2.
What can advertisers learn from the social giants’ Q1 reports? / Bastian Riccardi via Unsplash
The start of 2023 has been extremely turbulent from a macroeconomic perspective. Rising inflation and interest rates have put pressure on the purse strings of businesses. Paid social advertisers, and wider digital marketers, are under more pressure than ever to deliver value and operate optimally.
The Q1 earnings reports from the major paid social suppliers show how the tech giants are dealing with the increasingly challenging economic conditions. They also show which solutions and trends are working on their platforms.
Mark Zuckerberg has repeatedly said that 2023 is Meta’s year of efficiency. So far this has mostly resulted in layoffs, with 10,000 staff leaving the company. Then there’s talk of Meta moving away from metaverse projects to focus on AI.
However, Zuckerberg was keen to double down on Meta’s metaverse commitment, saying, “A narrative has developed that we’re somehow moving away from focusing on the metaverse vision, so I just want to say up front that that’s not accurate. We’ve been focusing on AI and the metaverse, and we will continue to.”
The figures in the report proved just how committed the business is to this project with Reality Labs, Meta’s AR and VR division, losing $4bn in Q1 alone. During 2022, the department lost $13.7bn.
Still, AI has caused the biggest buzz in tech this year, and there was plenty on how it will impact Meta’s products. Meta estimates that it will spend around $30bn this year on developing AI solutions to improve advertising, Reels and the News Feed.
This should be welcome news to advertisers; it should help improve attribution and delivery (which have both been severely impacted since Apple’s iOS updates two years ago and has long been one of the biggest challenges advertisers face with advertising on Meta’s platforms).
From an advertising perspective, Meta reported an increase in year-on-year revenue in Q1 for the first time in three quarters. This shows that brands are still investing in paid social advertising despite the worsening economic climate.
In fact, the report highlighted that across Meta’s family of apps there was a 26% increase in ads served; the delivery of these ads became more cost-effective for advertisers with cost-per-advert reducing 17%.
Scale has always been Meta’s biggest advantage over competitors. Remarkably, its family of apps continues to grow. Daily active users across all apps was up 5% year-on-year to three billion.
After Snap’s earning reports were published, the company’s stock price fell by 24%. Investors clearly weren’t impressed.
Analysts had expected the company to report a revenue figure of $1bn but the actual figure was $989M: a 7% drop compared with Q1 2022.
The earnings report wasn’t all bad news, especially for advertisers who want to learn how the platform is developing. User growth was up 15% year-on-year; chief exec Evan Spiegel said that this will help grow revenue for the remainder of the year.
Notice also Snap’s new AI chatbot, which talks to users and helps with organizing plans. Initial reactions haven’t been great, with many users giving Snapchat one-star reviews that criticize the bot. Still, this development could inspire a wider trend across social. AI bots within social platforms could aid brands in several ways: customer service, yes, but also product discovery, loyalty programs and much more.
Snapchat’s recent strategy has been to make emerging tech useful for users right away, like using AR to enable users to see how makeup and hair dye would look on them. That’s Snap’s approach to AI chatbots too, which could be really exciting once the creases are ironed out.
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The big news: Pinterest’s partnership with Amazon. In recent years, product discovery has shifted toward short-form video thanks to TikTok and Instagram Reels. This has left Pinterest in a difficult position; users are less interested in the static images the platform is known for.
Amazon ads will act as a third-party plug-in and will enable users to buy the products they’ve browsed on Pinterest directly on Amazon. Speaking about the new partnership, Pinterest chief exec Bill Ready said: “This aligns with our goal of making every Pin shoppable, so that we can enable as many users as possible to bring their dreams to life.”
Pinterest’s earnings call included plenty more positive news. Global monthly active users are up 7% compared to 2022; revenue grew by 5%. Despite the competition in product discovery from short-form video, Pinterest can still grow, and has a very engaged global audience.
Ready explained that improving the relevance of what users are shown on the platform is a key strategic objective. In its earnings release, the platform credited AI solutions with improving user retention, especially with Gen Z.
With efficiency and performance at front-of-mind of paid social advertisers, there’s plenty to be optimistic about in the Q1 updates.
It’s over two years since Apple began restricting the data it shared with app developers; since then, there has been progress in creating solutions to better understand and attribute performance. These solutions are not perfect, but there could be better things to come. Meta has committed $30bn to help solve this issue and Pinterest’s partnership with Amazon will simplify the process. Advertisers won’t be relying on pixels on their own properties to match sales.
From an efficiency perspective there was good news from Meta that ads are becoming cheaper, and all three platforms reported increased user engagement during Q1.
All of this should enable better results from advertisers in the paid social space and help brands overcome the difficult headwinds of 2023.
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iCrossing is a digital marketing agency that works with businesses to create a real step-change. Setting it apart, iCrossing is owned by Hearst, the world’s largest independent media, entertainment and content company. Being part of the Hearst family gives iCrossing access to Hearst audiences, data, consumer research and category experts which allows iCrossing to better spot new insights, trends and inform direction for its clients.Find out more