Where Amazon, Google, and Meta Are Headed

Where Amazon, Google, and Meta Are Headed

Amazon Google Meta

Technology earnings week is always watched closely. The rising and falling fortunes of Alphabet (Google), Amazon, Apple, Meta, and Microsoft have a direct impact on adjacent industries such as retail, advertising, and marketing. During a topsy turvy year such as 2022, the most recent quarterly earnings announcements of the Big Tech firms were followed especially closely. And here are some of the highlights from the Big Three of online advertising – Amazon, Google, and Meta — with implications for online advertising:

  • Amazon beat analysts’ estimates and enjoyed a strong quarter with the exception of its core retail business. The big news was the continued strong growth of Amazon Ads, which is Amazon’s advertising business that has quickly challenged Google and Meta for leadership of the online ad market. Ad revenue climbed 18% in the period for its most recent quarter. All told, Amazon Ads raked in $8.76 billion in the second quarter. Notably, in its earnings announcement, Amazon highlighted the recent launch of Amazon Marketing Stream, which “automatically delivers hourly Sponsored Products campaign metrics to advertisers or agencies through the Amazon Ads API.” This is a sign that Amazon is developing ad tech data and marketing services, which is a direct challenge to Google. What it means: the success of Amazon Ads dovetails with the ascendance of a more privacy-focused era. Apple in particular has initiated privacy controls that make it more difficult for advertisers to target consumers with ads that use third-party data. Amazon Ads is beyond the reach of such privacy controls because Amazon Ads is based on first-party data that Amazon collects from its customers. Amazon is not the only retail business building its own ad network. But it’s the leader. We expect more businesses will choose Amazon Ads as an advertising platform, and we have developed services accordingly.
  • Meta suffered its first-ever revenue drop for the quarter. The reasons are complicated. First off, TikTok is threatening the popularity of Facebook and Instagram (both owned by Meta), and Meta’s response to TikTok, Reels, doesn’t generate money as efficiently as Instagram Stories and the main news feed. Meta has also reeled from the impact of Apple’s privacy controls. What it means: Meta is in a time of transition – but never count out Meta. The company is investing heavily into the emerging metaverse, which is dragging its profits down but may boost Meta over the long run. And although Reels are a work in progress, progress is being made. As analysts at JMP wrote, “With Meta making progress with Reels while AI improves recommendations across content and advertising, we expect growth to rebound from current levels while the company is more disciplined in its cost structure.” And, overall, the company’s base of monthly active users continues to increase. The real threat to Meta in the near term: how well the company can rebound from the threat of Apple’s privacy controls. The long-term threat: how well Meta can attract and keep Gen Z users.
  • Google is sitting pretty. Alphabet’s search ad sales grew more than 13 percent in Q2 2022 to $40.7 billion, beating analysts’ expectations of $40.2 billion. Search, of course, is Google’s bread-and-butter business, and Google’s investments into its core search ad units are paying off as advertisers lean into performance marketing tactics amid economic uncertainty. But life isn’t all rosy at Google. At YouTube, ad sales rose 0nly 5 percent after jumping 84 percent in the same period a year ago. This reflects the impact of TikTok’s popularity. What it means: Google is going to flourish in 2022 and 2023 especially as advertisers weather economic uncertainty. Google is a safe bet, and Google continues to develop new ad units that enhance its performance marketing capabilities. Watch for Google to continue to push artificial intelligence-related services and tools that automate online advertising — while managing the increasingly thorny challenge of developing alternatives to third-party cookies, which the company had said it would do by 2022 and now is rescheduling for 2024.

What Advertisers Should Do

  • Keep a diversified ad portfolio across the Big Three: Amazon, Google, and Meta. If you are satisfied with the results you are seeing, don’t let Meta’s challenges scare you away. But do a gut check with your agency partner on how your ads are performing.
  • Work closely with your agency partners to understand the impact of privacy controls, especially from Apple.
  • If Gen Z is an important audience, take a closer look at TikTok. TikTok looms large as it challenges YouTube and Meta especially.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

What Does Meta’s Big Move with Horizon Worlds Mean to Brands?

What Does Meta’s Big Move with Horizon Worlds Mean to Brands?

Meta

Meta, the parent company of Facebook and Instagram, has announced that the company will help individual creators generate income in Meta’s Horizon Worlds platform. This is a significant sign that the so-called metaverse will open up ways for people to monetize the metaverse as it takes shape.

What Is the Metaverse?

The metaverse is a shared virtual world where people can work, play, and live through digital twins, or avatars. Aspects of the metaverse are here already: every time we use a digital currency, every time we hang out on Fortnite or Roblox (gaming is currently a big slice of the metaverse), we’re engaging with parts of the metaverse. They’re just not connected seamlessly yet.

Businesses such as Meta aren’t waiting for all the details to get sorted, though: they are staking a claim to this nascent world by building their own virtual worlds.

What Is Horizon Worlds?

So, what exactly is Meta trotting out? Horizon Worlds (formerly Facebook Horizon) is a free virtual reality, online video game that allows people to build and explore virtual worlds on the metaverse. In short, Horizon Worlds is one potential access point into the metaverse via a gaming platform.

Meta first published the game on its virtual reality Oculus VR headsets in the United States and Canada on December 9, 2021. This approach meant that the audience for Horizon World was necessarily limited to people who could afford a virtual reality headset (specifically, Oculus VR). But Meta is now making Horizon Worlds available even if users do not have virtual reality headsets.

What Did Meta Announce about Horizon Worlds?

Mark Zuckerberg said Meta is testing new tools that allow creators to expand their reach—and create some lucrative opportunities—within the worlds they build on Horizon Worlds. In a video, he said, “The ability to sell virtual items and access to things inside the worlds is a new part of [the] e-commerce equation overall. We’re starting rolling this out with just a handful of creators and we’ll see how it goes but I imagine that over time we’ll get to roll it out more and more.”

If there’s anything Meta wants you to take away from this development, that would be:

  • Meta is testing a way for creators to sell virtual items and experiences within their worlds.
  • Meta is also testing a Horizon Worlds Creator Bonus program.

While Meta is currently working with a handful of creators to get feedback on this initiative, the long-term plan is to create an environment in which creators can earn a living in a world of digital goods, services, and experiences. The overall vision is that the metaverse will crack possibilities for entrepreneurs—wide open. And it’s not a matter of creators being thrown into this world without a safety net or guide: a $10 million Horizon Creators Fund, announced last October, is meant to provide resources to Horizon Worlds creators.

The opportunities are certainly compelling: Meta is rolling out a test with a few creators that facilitates the selling of virtual items within their worlds. This might manifest as attachable accessories entrepreneurs create for a fashion world, say, or paid access to a new part of a creator’s world.

Meanwhile, the Horizon Worlds Creator Bonus program, meant for participants in the United States, offers bonuses in the form of goal-oriented monthly programs that reward creators with a pay-out at month’s end. The bonuses honor progress made towards the creator’s goals, and are not subject to fees (read: creators will be paid in full). While rewards may evolve, creators are currently rewarded (in the limited test) for building worlds that attract the “most time spent.”

What Does All This Mean?

This is how we read this news:

  • Horizon Worlds is yet another sign that the metaverse is getting bigger with extraordinary speed. For confirmation, one need look no further than JP Morgan, which says the metaverse is a “trillion dollar industry” in which it acknowledges “explosive interest.” They aren’t just talking the talk: the investment bank has opened a lounge in the blockchain-based virtual world Decentraland. The Onyx lounge, named for JP Morgan’s Onyx blockchain unit, includes a roaming tiger that greets visitors and a portrait of CEO Jamie Dimon, not to mention a suite of Ethereum-based services. JP Morgan’s claim to fame? That it is the first major lender to enter the metaverse.
  • It’s also an example of how businesses are empowering the so-called creator economy, a class of businesses comprising millions of independent content creators and influencers. We’re hearing about creators more partly because apps like TikTok have granted them more power and more influence.

But the creator economy stands to become even more powerful. That’s because collaboration networks are proliferating, networks that give creators an all-in-one platform to create communities and build influence. In addition, gaming sites such as Roblox and Twitch offer creators opportunities to monetize their work with potential brand partnerships, even as crypto currency sites like Rally.io empower creators to mint their own currency.

It’s a rich vein to mine, and big social networks such as Meta are responding by making themselves more attractive to creators (that brings us back to the news about Horizon Worlds and the resources Meta is making available). Going forward, more businesses will tap into niche networks to partner with emerging creators who are lesser-known but possess tremendous street cred. Will big-name partnerships with stars still thrive? Sure, but the social media icons are going to need to make room for the new kids in town.

What Brands Should Do

What does this mean for your brand? As you consider the opportunities inherent in the metaverse, we recommend that you:

  • Remember your audience. Do they care about the immersive worlds that the metaverse makes possible? That is, will marketing and advertising in the metaverse even matter to them—much less reach them? The biggest audience for the metaverse currently skews young, although some brands are making a concerted effort to reach out to older consumers. Ask yourself who your audience is, and if you have the resources and energy to reach out to them if their engagement with the metaverse represents a tougher sell.
  • Reflect on your appetite for experimentation. This is a new frontier that is already evolving. Are you ready to pivot—and pivot again—as conditions change?
  • Learn from businesses that have already found their marketing access point in immersive gaming worlds, which are, as noted, a popular segment of the metaverse.

Contact True Interactive

Want to learn more about the metaverse? Eager to dip a toe but looking for some guidance? Contact us. We can help you map a way in this new world.

Meta Misses the Mark; How Should Advertisers React?

Meta Misses the Mark; How Should Advertisers React?

Facebook Meta

Over the years, Facebook has been a Teflon brand. No matter how many controversies and setbacks the company has faced, it has seen its stock price and market capitalization soar. But all that changed on February 2 when Facebook’s parent company Meta announced earnings for the fourth quarter 2021. The company:

  • Missed its earnings estimates.
  • Reported that Facebook’s global daily active users declined from the previous quarter to 1.929 billion from 1.930 billion. Although Facebook has experienced drops in the United States before, this was the first time the world’s most popular social platform had experienced a decline in its user base.
  • Forecast weaker-than-expected revenue growth for the next quarter.
  • Said that the company would suffer a $10 billion revenue hit in 2022 because of the impact of Apple’s iPhone privacy controls launched in 2021.

Investors were stunned. The next day, Meta suffered a 26 percent drop in its stock price – the largest single-day drop in history. Not just for Meta. For any company.

Companies can have a bad quarter. But why did Meta suffer a historic drop in its stock price? There is no single, clear-cut answer. But a few factors no doubt played a role:

  • The drop in users, although not massive, stoked concerns that Facebook is finally beginning to feel the impact of its ongoing brand safety controversies and indifference from the growing Gen Z population. Losing members can be a red flag for advertisers, and Facebook needs advertising revenue to succeed.
  • Meta surprised investors by saying it still has not recovered from the impact of Apple’s consumer privacy controls. In 2021, Apple altered its operating system to require apps to get a person’s permission before tracking their data across apps or websites owned by other companies for advertising, or sharing their data with data brokers. This move curtailed the ability for advertisers and ad platforms such as Facebook to target digital ads across the web. Ad platforms such as Snapchat and Twitter said that the restrictions were either not hurting them or that they had figured out satisfactory ways to keep creating effective ads despite the existence of the privacy controls. It was alarming to hear that Meta had not figured out a solution yet.
  • Meta’s big bet on the next generation of the internet, the metaverse, is costing the company – a lot. Meta said that the company spent $10 billion in 2021 on various products that form the building blocks of the metaverse. That spend hurt profits. And the metaverse is still many years away, which has made investors ask: just how much is the metaverse going to cost Meta?

Even still, Facebook achieved $33.67 billion in ad revenue for the quarter, which was better than expected. Should Facebook’s advertisers be concerned? As an agency that helps many businesses build their brands and convert customers through Facebook advertising, we believe that if you advertise on Facebook, you should:

  • Keep advertising on Facebook if you are satisfied with your results so far. Based on our client work, Facebook continues to drive conversions even though the cost per conversion has increased and conversion rates are lower. Facebook remains an efficient and cost-effective alternative to competing platforms.
  • Adapt to the new reality of Facebook advertising. One of the challenges with Facebook advertising under Apple’s privacy controls is having access to less user data for targeting various audience segments with ads. We’ve been working with Facebook to develop workarounds such grouping our clients’ target audiences together to give the Facebook algorithm more data to work with a (as opposed to breaking up audiences into separate groups). We’ve also removed audience exclusions from campaigns. After we aggregated audience data and removed exclusions, we gradually began to see an improvement in ad conversions following a drop resulting from the privacy controls.
  • Keep an eye on the decline in users. Understand where they’re going when they leave Facebook. In particular, Facebook said that TikTok has emerged as a much stronger competitor. TikTok is especially red hot with the Gen Z generation. In addition, monitor sentiment among your audiences, foremost your customers. In light of Facebook’s ongoing controversies over privacy and the publication of harmful content, are your customers expressing concern? Is your brand safety at risk? (This may or may not be the case. As we’ve blogged before, social media will always be a messy place to live, and many brand have learned to live alongside that reality.

Advertisers have more choices than ever – emerging apps such as TikTok, retailer ad platforms such as Amazon Advertising, to name a few. The well-established ad platforms such as Google continue to launch new products. As always, we urge advertisers to stay on top of the evolving market. At True Interactive, we advocate for our clients by understanding how the ad industry is changing so that we can maximize clients’ return on ad spend. Contact us to learn how we can help you.

Photo by Dima Solomin on Unsplash