The global ad slowdown is real. So real in fact that even the usually recession-proof online platforms are feeling the crunch.
The slowdown has ravaged ad sales across YouTube, Snapchat, Twitter and Facebook over the last quarter. That’ll likely continue for the rest of the year. Inflation isn’t settling down anytime soon and neither are the lingering effects of the pandemic. Not to mention a war in Ukraine that continues to reverberate across industries, including advertising.
Then there are the after effects of the semiconductor shortage that continue to weigh down on some of the largest advertisers, as well as the pervasiveness of softer consumer spending. Add onto that the fact that macroeconomic issues take a while to trickle through to advertising, as well as the loss of third-party addressability and how it continues to throttle the flow of media dollars into some platforms more than others.
All told, a rocky 2022 could get even worse for some of the media industry’s most valuable companies.
Here are the key numbers that show the precarious state of online advertising spending now:
- YouTube raked in $7.4 billion in ad revenue in the second quarter, up 4.8% from a year earlier. That’s the slowest pace since Alphabet began disclosing that data in 2019.
- Facebook owner Meta’s quarterly revenue (the bulk of which comes from advertising) came in at $28.2 billion, down one percent on the same period a year ago. It’s the company’s first revenue decline in a decade.
- Snap’s revenue for the second quarter was $1.1 billion. That’s 13% up from the prior-year quarter, but it’s also short of analysts’ expectations. Advertisers are cutting ad spending on the app more than expected — a slump the company attributed to the broad economic uncertainty.
- Twitter’s ad revenue slowed to a crawl in the quarter, hitting $1.08 billion — a 2% gain year over year — as the platform struggled with economic challenges and a court battle with billionaire Elon Musk, who offered $44 billion to buy the company before trying to back out of the deal.
Forecasts for the remainder of the year from these companies were equally as glib. Here are the main sound bites from their earnings calls:
- Ruth Porat, chief financial officer of Alphabet, said: “In YouTube and Network, the pullbacks in spend by some advertisers in the second quarter reflects uncertainty about a number of factors that are challenging to disaggregate. Within other revenues in the third quarter, we expect an ongoing headwind from the fee changes and the slowdown in buyer spend that impacted results in the second quarter.”
- Dave Wehner, chief financial officer at Meta, said: “Advertising revenue growth slowed throughout the second quarter as advertiser demand softened. The deceleration has been broad-based across verticals, and we believe businesses are lowering their advertising spend in response to the increased economic uncertainty. Foreign currency headwinds also increased throughout the second quarter.”
- Derek Andersen, chief financial officer at Snapchat, said: “We’re seeing these various headwinds put pressure on the earnings of a wide variety of companies, and this is directly impacting the demand for advertising. Specifically, advertising spending, in particular, auction-driven direct response advertising is among the very few line items in a company’s cost structure that they can reduce immediately in response to pressure on their top line or their input costs.”
So why is ad spending slowing on platforms? We took a closer look.
It seems like a two-track online ad economy emerged over the last quarter, with advertisers shoring up search ad spend as a critical part of their media strategies while cutting other areas like online display and social media. Google’s search revenue over the period grew at a 13% clip compared to the same stretch last year, to reach $40.7 billion. It’s a similar story at Microsoft, where Bing search ad revenue rose 15% in the quarter compared to the same one last year. Compare these gains to the sluggish growth and even declines posted by YouTube and other media platforms over a similar period. Search advertising continues to be the one safe harbor for many advertisers when ill winds blow.
Downturns suck out waste like a vacuum cleaner
Consumer spending and corporate investment are likely to be subdued for a while yet, leaving ruthless cost efficiency as the only viable way to maintain margin. Or to put it another way, all corporate eyes are on inefficiencies, including in advertising. It’s a point not lost on Google. The day after Alphabet disclosed its Q2 earnings, Google unveiled a transparency tool dubbed “Confirming Gross Revenue,” in what can only be interpreted as a play to allay advertisers’ growing fears that its automated “black box” platforms don’t deliver the value promised and reverse the decline noted in the previous day’s disclosure.
In a blog post marking the launch, Allan Thygesen, president, Americas and global partners at Google, referenced a study from PricewaterhouseCoopers, which found that 15% of all automated ad spend is unaccountable. “One of my biggest concerns about this trend is its impact on marketer confidence in digital advertising,” he noted, going on to claim that this team wants to provide greater visibility into such investments.
Certain about the uncertainty
As for how ad spending will shake out the rest of the year, it’s hard to say.
“The remainder of the year is up in the air due to what’s going on in the macro environment that I wouldn’t draw causal conclusions from in Q2,” said Aviran Edery, svp at Verve Group. “We are headed into a traditionally stronger part of the advertising calendar. Q2 is not necessarily going to be a predictor of what is going to happen in Q3, Q4, for the rest of the year. There is just so much that’s fluid and in flux in the macro environment that I think each platform is going to have their own independent outcomes.”
Seb Joesph and Ronan Shields contributed reporting to this story.
Web3 and the transition toward true digital ownership
Image Credit: ArtemisDiana/Getty
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How do you think you would answer if I asked you the following question: “What do you own online?”
In real life, you own your home, the car you drive, the watch you wear, and anything else you have purchased. But do you own your email address or your business’s website? How about the pictures that populate your Instagram account? Or the in-game purchases on Fortnite or FIFA video games or whatever else you are playing?
My best guess is, after casting your mind through the things you use the internet for (which for everybody is pretty much everything, social and professional), you would struggle to find a solid answer.
Maybe you would ask me to explain what I mean by “ownership.” But it doesn’t really matter. And while I don’t mean this to be a trick question, it kind of is. Because in the current version of the internet, we don’t have ownership rights online.
MetaBeat will bring together thought leaders to give guidance on how metaverse technology will transform the way all industries communicate and do business on October 4 in San Francisco, CA.
Digital ownership: Participants and products
To understand why we don’t own anything online, we must first understand the evolution of the internet and how it gave rise to the business model that has dominated its current iteration.
In the 1990s — the decade of desktop computers and dial-up connections — the internet was predominantly a content delivery network consisting of simple static websites showcasing information. What we refer to today as Web1 was slow, siloed, and disorganized.
Next came the platforms, such as Facebook (now Meta) and Google, driven by wireless connectivity and the development of handheld devices like laptops, smartphones, and tablets, which gave us free-to-use services that enabled us to edit, interact with and generate content. These platforms centralized the web, putting in place a top-down structure that saw users reliant on their systems and services.
This evolution of the internet took place in the mid-2000s and is the version we know today. We call it Web2. It is a model based on connectivity and user-generated content, made in the image and interests of companies like Facebook, Twitter, Instagram, and YouTube.
In this environment, netizens are both participants and products. We sign up for services in exchange for our data, which is sold to advertisers, and we create content that generates value and fuels engagement for these platforms. We do all this while having no rights to anything online.
Our social media profiles can be taken down and our access to email accounts or messenger apps suspended. We don’t own any of the digital assets we purchase and have no autonomy over our data. Businesses we build online are often reliant on platforms and are therefore vulnerable to algorithms, data breaches and shadow bans.
The deck is stacked against us. Because the option not to be involved, when so much of the commerce and communication in the world takes place online, is not really an option at all. And yet there is nothing that we can point to and call ours. Nothing we have any actual authority over.
And, it is this dynamic that Web3 is determined to change.
Web3 and the “internet of value”
Right now, when most people hear the term “Web3” they probably think “metaverse”. But a better way to think about Web3 is as the evolution of the internet.
Today, the digital experience is very corporate and very centralized. Web3 will offer the dynamic, app-driven user experience of the current mobile web in a decentralized model, shifting the power from big tech back to the users. It will do this by spreading the data outward — putting it back in the hands of netizens who are then free to use, share and monetize it as they see fit — and expanding the scale and scope of interactions between users and the internet.
Underpinning that expansion will be guaranteed access, which means anyone can use any service without permissions and no one can block, restrict or remove any user’s access.
The idea then is that Web3 will not only be more egalitarian but that it will create an “Internet of Value” because the value generated by the web will be shared much more equitably between users, companies, and services, with much better interoperability. Users will have full ownership, authority, and control over both the content they create and their data. But how will this help us transition toward true digital ownership?
NFTs hold the key to digital ownership
The truth is that digital ownership is not too hard a problem to solve. And we already have the solution: NFTs.
In the public consciousness, NFTs are known for the projects that have garnered the most media attention, such as CryptoPunks and Bored Ape Yacht Club. While projects such as these have catapulted the term into the zeitgeist, the usefulness of the underlying technology has been much less discussed.
Simply put, NFTs act as proof of ownership. The details of the NFT’s holder are recorded on the blockchain, all transactions and transfers are tracked and transparent and available to the public, and everything is managed by the token’s unique ID and metadata.
So, how does this work in practice? Let’s say I create an NFT. As soon as I upload it, a “smart contract” is created that tracks its creation, the current owner, and the royalties I will receive. If someone decides to purchase it, they own that NFT and any additional perks that come with ownership. Their details are registered on the blockchain and nobody can edit or remove them.
Now, let’s say that the market for my NFTs starts to heat up, demand grows and the value of my collection begins to rise. If the owner decides to sell, they make a profit and I earn a small royalty from the resale. The change in ownership is tracked on-chain in real-time and the smart contract ensures my royalty fee is deposited directly in my wallet. This is the key value proposition of NFTs: Verifiable ownership and the option to liquidate digital assets.
What’s next for Web3?
This is what ownership looks like in Web3. It is the promise that netizens will be able to own their digital assets in the same way that they own their home, car and watch. NFTs will usher in a more equitable digital economy and will play a central role in the future of digital commerce.
The fact is that as of right now, we are still writing the Web3 rulebook. This is still a very new, very young space. And while few things are certain, what we can say for sure is that the internet is only moving in one direction: ownership.
The guiding principle in Web3 is to accelerate the transition towards a more equitable digital environment. It is very much opt-in, an internet built by the people for the people. It is one in which ownership is the foundation upon which new products, networks, and experiences are being built. And it is fundamental to establishing the internet of value.
Over the next few years, as Web3 develops it will operate alongside Web2. The infrastructure supporting Web2 is very strong and I don’t see us completely shifting away from that any time soon. However, in the medium-to long-term, Web3 will completely reshape our relationship with the internet.
Filip Martinsson is cofounder and chief operating officer of Moralis.
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Apple blocked the latest Telegram update over a new animated emoji set
Ever since Apple launched the App Store, developers big and small have gotten caught up in the company’s approval process and had their apps delayed or removed altogether. The popular messaging app Telegram is just the latest, according to the company’s CEO Pavel Durov. On August 10th, Durov posted a message to his Telegram channel saying the app’s latest update had been stuck in Apple’s review process for two weeks without any real word from the company about why it was held up.
As noted by The Verge, the update was finally released yesterday, and Durov again took to Telegram to discuss what happened. The CEO says that Apple told Telegram that it would have to remove a new feature called Telemoji, which Durov described as “higher quality vector-animated versions of the standard emoji.” He included a preview of what they would look like in his post — they’re similar to the basic emoji set Apple uses, but with some pretty delightful animations that certainly could help make messaging a little more expressive.
“This is a puzzling move on Apple’s behalf, because Telemoji would have brought an entire new dimension to its static low-resolution emoji and would have significantly enriched their ecosystem,” Durov wrote in his post. It’s not entirely clear how this feature would enrich Apple’s overall ecosystem, but it still seems like quite the puzzling thing for Apple to get caught up over, especially since Telegram already has a host of emoji and sticker options that go far beyond the default set found in iOS. Indeed, Durov noted that there are more than 10 new emoji packs in the latest Telegram update, and said the company will take the time to make Telemoji “even more unique and recognizable.”
There are still a lot of emoji-related improvements in the latest Telegram update, though. The company says it is launching an “open emoji platform” where anyone can upload their own set of emoji that people who pay for Telegram’s premium service can use. If you’re not a premium user, you’ll still be able to see the customized emoji and test using them in “saved messages” like reminders and notes in the app. The custom emoji can be interactive as well — if you tap on them, you’ll get a full-screen animated reaction.
To make it easier to access all this, the sticker, GIF and emoji panel has been redesigned, with tabs for each of those reaction categories. This makes the iOS keyboard match up with the Android app as well as the web version of Telegram. There are also new privacy settings that let you control who can send you video and voice messages: everyone, contacts or no one. Telegram notes that, like its other privacy settings, you can set “exceptions” so that specific groups or people can “always” or “never” send you voice or video messages. The new update — sans Telemoji — is available now.
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