Facebook revenue almost doubled: Twitter hit its target, but stock falls
In addition to a decrease in overall metrics, some marketers reported a decline in the performance of lookalike audiences.
Earnings reports released on Wednesday show that Facebook nearly doubled its Q1 earnings compared to last year. Revenue from advertising was up 146% compared to 2020 while daily active users only increased 8%.
The increase was driven largely by an uptick in ad prices, according to the CFO outlook commentary on the earnings report: “We are pleased with the strength of our advertising revenue growth in the first quarter of 2021, which was driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered.”
The following day, Twitter reported $1.04 billion in revenue for Q1, up 28% YoY, and 199 million daily users, just missing the 200 million forecast by FactSet. Ad revenue grew 32% YoY. Despite revenue growth, Twitter’s stock was down 11% in after hours trading on Thursday. Twitter’s forecast for Q2 revenue was slightly below expectations.
What the Facebook results mean for advertisers
COVID-19 affects reporting numbers. When pulling your own numbers, it’s important to remember that metrics for most businesses may be off one way or another this year as COVID lockdown began in Q1 of 2020 and lingered for the rest of the year. As such, numbers may have been lower or stagnant in 2020, making 2021 seem exceptionally high (or even low depending on your or your client’s business).
COVID-19 accelerated digital advertising. After an initial dip when COVID-19 lockdowns began and consumers figured out what was going on at work and at home, digital advertising increased. Quarantine, plus working and schooling from home, meant even more time in front of screens and more opportunity for advertisers to reach their audiences. It also meant an increase in competition for ad visibility and, hence, an increase in ad prices.
What’s changing for Facebook? With the release of Apple’s iOS 14 and IDFA, Apple users will have to consent to cross-app tracking and advertisers will have two short lines of text to make their case to consumers. Facebook initially came out disparaging the change, saying it will hurt publisher revenues. “We know this may severely impact publishers’ ability to monetize through Audience Network on iOS 14, and, despite our best efforts, may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14 in the future,” wrote Facebook.
In an update to the announcement, Facebook confirmed that they’d adopt Apple’s SKAdNetwork API but won’t implement Private Click Measurement (PCM), claiming that it doesn’t capture the complexities of the user journey. Instead, Facebook created Aggregated Event Measurement (AEM) in order to measure conversion events on iOS.
Pricing changes correspond with privacy initiatives, too. “Directly after the platform change, we saw an increase in both cost-per-click and cost-per-purchase across our client portfolio, regardless of industry,” said Lauren Clawson, social media team lead at Portent. “In addition to a decrease in overall metrics, some SMMs have been reporting a decline in the performance of lookalike audiences, which are typically our top performers. This was expected, as a decrease in attribution window decreases the data points that Facebook has to make connections between their users.”
The future. “We expect second quarter 2021 year-over-year total revenue growth to remain stable or modestly accelerate relative to the growth rate in the first quarter of 2021 as we lap slower growth related to the pandemic during the second quarter of 2020,” Facebook’s CFO said in the announcement. The increase in ad prices will likely continue to bolster these predicted revenue increases.
“It’s also on us to keep making the case that personalized advertising is good for people and businesses and to better explain how it works so that people realize that personalized ads can be privacy-protected,” said Facebook COO Sheryl Sandberg on the earnings call, speaking to the privacy changes that pit tech against users against advertisers.
Possible diversification for Twitter
While Twitter has repeatedly added bells and whistles to its central offering — Moments, Fleets, Spaces, live streaming — and increased the maximum character count, it hasn’t had a break-out moment either through product development or acquisitions. It remains, like Facebook, an important news source for many of its readers, but with less engagement and interaction than Facebook.
Could this explain Twitter’s interest in Clubhouse? Yuval Ben-Itzhak, President of the social media marketing platform Socialbakers, said that while this acquisition didn’t go through, Twitter seems to be looking at diversification, “possibly with something disruptive. One thing’s for sure, innovation and fresh new content formats will always draw the crowds, but Twitter needs to be careful not to veer too far from its core use case, real-time information sharing via tweets, live streams and, thanks to the launch of Spaces, by voice.”
Ben-Itzhak was upbeat about Twitter’s Q1 results. “It’s no surprise to see Twitter reporting a strong Q1, after the results reported by Snap, Google and Facebook. It’s also good to see the user number growing steadily.”
He also noted that engagement has also been up with people use thing platform to discuss important events like the pandemic and the US elections.
Why we care. If titans like Facebook (and Google) had done a better job over the last three to five years of explaining the value exchange to consumers (we get your data, you get a free and relevant web experience) — and shown more competence in looking after consumer data — we might not be in this situation. Until we know the impact Apple’s initiative is going to have on the value of inventory, it’s hard to extrapolate much from these good Q1 results.
Twitter continues to be a very high profile social media channel, even in the absence of former President Trump, and the increase in ad revenue must be welcome, but it still seems to be finding its way as a business. Perhaps it’s looking for its Instagram (Vine wasn’t it).
Additional reporting by Kim Davis