Signal 30.10: Foxtel shows ambition, Meta Q3 revenues flying, Google adds $5.4b in NEW ad revenue in Q3 alone
This week: Foxtel makes a statement on the future of TV measurement, Q3 Meta revenues up a staggering 22%, Q3 Google up 11% with YouTube and search both continuing to increase share of investment.
FOXTEL ISN’T STANDING STILL ON MEASUREMENT
What’s new: Foxtel announced a partnership with US technology provider Videoamp at their Upfronts on Thursday which demonstrated their appetite to move beyond incumbent Australian measurement systems and look elsewhere to reimagine how video advertising can be measured and analysed. Videoamp has built a measurement and insights platform which provides cross screen consolidated measurement of delivery as well as ad activity and works with multiple businesses in the US including dentsu (where I work too)
Why it matters: The local TV and video industry would admit it is playing catch up on how screen agnostic video content and advertising is measured and analysed. Meanwhile, the issue becomes a larger and larger one as audiences continue to embrace streaming platforms both free and paid, and advertising dollars into digital video continue to increase. The delays over the last 5-7 years demonstrate that solution by committee is perhaps not the best approach to produce a tangible outcome and product that can deliver what marketers need here, and Foxtel looking outside of the incumbent provider is the most assertive demonstration of this. The greater opportunity here is not to get cross screen video measurement to the same level as how TV has been historically measured, it is to create a world where video-based content and advertising is in a position to harness the immense opportunity that exists to create deep and meaningful insights on consumption, effectiveness, granular delivery and connect this to sales and revenue for marketers.
Marketer implication?: My view is the Videoamp move from Foxtel isn’t about creating a currency nor as narrow as just providing assurance on delivery. It’s much more ambitious than this. I don’t believe Foxtel have invested resource in this partnership just to able to tell you that the audience you were promised on AFL Super Saturday delivered (although that is a good thing to know), it’s much more profound. Foxtel (and I would say all video providers and networks) would harbour the ambition that they want video to have the best analytics, insights, measurement and connection to effectiveness of any media.
META – REVENUES UP 22% DRIVEN PRIMARILY BY ARPU INCREASES
What’s new: Meta released its Q3 results last week, and revenues were up 22% for the prior comparable period. What’s even more striking was their operating margin moved from 20% in Q3 of 2022 to a staggering 40% in Q3 of 2023, driven by significant staff cuts in general and administrative roles.
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Why it matters: In a flat enterprise advertising market, Meta is growing at high levels and has returned to +20% YOY growth (which is especially impressive as it nears 20 years of operations), The big driver of the revenue increase was average revenue per user which was up 19.3%. In plain terms this means Meta extracted 19.3% more in ad revenue per each user – which is either coming from increasing the price of ad inventory, or serving more ads to each user, or likely both. Ultimately this means Meta platforms are becoming more expensive to advertise on. Meta’s growth is impressive considering it has no offering in one of the most high growth elements of advertising right now – digital video – and has invested significant amounts in an area that has very little marketer interest (the metaverse). This does demonstrate the resilience of their core current ad product.
Marketer implication?: My hypothesis (from local market data I have access to) is a large chunk of the Meta growth is coming from SME based advertisers and not mass-market ones. The mass/enterprise ad market is flat at best right now, but the SME market remains lucrative for those who can tap into it (Google and Meta). For mass marketers, the reality is these results show Meta is either showing its users more ads (which equals more clutter, more competitive noise) or its charging more for the same inventory (cost inflation). Both of these ultimately raise the level of return required for a marketer.
GOOGLE Q3 REVENUES – SEARCH AND YOUTUBE BOTH BACK TO DOUBLE DIGIT GROWTH
What’s new: Google also announced their Q3 results, and it was a return to good news for the monster from Mountain View. YouTube revenues were up 12% for the quarter to $7.9 billion USD, and search and services hit a staggering $44 billion USD for the 3 months. For context this means marketers put an incremental $5.4 billion more into Google in Q3 of 2023 compared to Q3 of 2022.
Why it matters: Google doesn’t disclose the same level of detail around user volumes as Meta does, but it’s a reasonable hypothesis to assume that the majority of growth in the quarter is coming from increased prices (across search and YouTube) or increase ad loads (across YouTube). Like for Meta, this means higher inventory prices or more clutter. Another contributor is evident in the declining revenue of ‘Google network’. This represents ad inventory Google sells on sites not owned by Google. This was down 2.6% and for the first time ever YouTube revenues (a property Google owns 100% of) exceeded those of the Google network (which Google owns 0% of). It is not unreasonable to expect this trend to continue and Google to look to move more revenue into sites it owns and operates. What it also means is for third party sites that have for many years relied on Google Network revenue to subsidise their operations, the growth of this revenue lines is likely over for you and you’ll need to find another source of revenue to make up the shortfall..
Marketer implication?: The challenge for marketers in this environment is simple – for a media company to have double digit growth they’re either charging you more or running more ads adjacent to yours. Either way the cost increases. For marketers in Australia facing flat or declining sales revenue it is going to be hard to pay more for advertising inventory without having to sacrifice something else to compensate for the increase. For businesses critically reliant on search, they likely have to eat any prices rises as they have no alternative … but this will put pressure on budget and profitability. For those less reliant/exposed, price rises can be tolerated as long as the real return (not the perceived or necessarily reported attribution) creates incremental value. But it’s a fine line, especially in a hyper competitive and hungry ad market. Marketers need to keep a very close eye on their real search costs (for brand and brand inclusive, plus category terms) as well as their YouTube CPM’s.