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As the heart of the tech earnings season comes to a close, a nagging theme has been weakness in the digital ad market.
The war in Ukrainerising inflation, Apple Privacy changes and an overall reduction in ad spend help explain why Facebook, Google, Amazon and Twitter All reported disappointing sales numbers this week, and Snap last week.
But there’s another threat that’s getting bigger: TikTok.
The app for viral short videos has grown in popularity, becoming the world’s third-largest social network last year, behind Meta’s Facebook and Instagram, according to Insider Intelligence.
Advertisers are tracking eyeballs.
“Across the industry, short-form video continues to take up a larger share of time,” Atlantic Equities analysts wrote in a note Thursday. challenge for Meta. “
TikTok is owned by China’s ByteDance, which is privately held, and is reported to be worth $140 billion. Insider Intelligence estimates TikTok will have 755 million monthly users globally this year and says its market share on the social network will hit 20% this year, to nearly 25% by 2024.
Meta said Wednesday that Facebook’s ad revenue grew only 6.1% in the first quarter, the slowest growth in the company’s 10-year history as a public company. Total revenue according to analysts’ estimates is the same as the company’s forecast for the second quarter, when sales are likely to fall from a year earlier.
Facebook has a product called Reels that competes with TikTok in the short-form video market. The company tell investors that 20% of time on Instagram was spent on Stories, while 50% of time on Facebook was spent on video, “monetizing at a lower rate” than core products.
Facebook CFO Dave Wehner said during the earnings call. “Short-form video is the latest iteration of this and it’s evolving very quickly.”
In the alphabet of annual reportthe company has recognized ByteDance as a competitor on social networks, along with Meta, Snap and Twitter, and a competitor in digital video services where Amazon, Apple, Disney and Netflix There are also offerings.
Alphabet’s first-quarter results this week have trailed estimates, largely due to a major shortcoming at YouTube, which was supposed to grow 25% but expand only 14%. The CEO said consumers are spending more time on YouTube Shorts, which grew to 30 billion views in the quarter, a quadrupling from a year ago.
‘TikTok Competition Concerns’
YouTube is testing ad formats on Shorts, but in the meantime, analysts are slashing their growth forecasts. Stifle reduced its estimate of YouTube’s growth rate for the second quarter from 13% to 10%, and Cowen Equity Research reduced its forecast from 19.7% to 7.5%.
“We think the revenue results were largely positive, but not enough to assuage growing advertising recession worries,” BMO Capital Markets analysts wrote in a note Wednesday. investors, as well as growing concerns about TikTok competition after YouTube misses again and with larger margins than before,” BMO Capital Markets analysts wrote in a note on Thursday. Private. They recommend buying stocks.
Last week, Snap Disappointing result report, CEO Evan Spiegel told investors the quarter “proved more challenging than we expected.” And on Thursday, Twitter come short on first-quarter revenue. The company did not provide any comment as it is in the process of being acquired by Elon Musk.
Then there’s Amazon.
Unlike the major social media platforms, Amazon is not explicitly tied to TikTok. Advertisers tend to be brands promoting their products on Amazon’s dominant app and e-commerce site.
Yet even Amazon’s rapidly growing ad business good reduction analyst estimates, up 23% from a year earlier to $7.88 billion. Wall Street expects $8.17 billion, according to StreetAccount.
“The pandemic and the ensuing war in Ukraine have brought extraordinary growth and challenges,” Amazon CEO Andy Jassy said in a statement. statement, referring to the company’s widespread downturn.
Ads don’t appear much in the company’s earnings call. It’s a much more prominent theme elsewhere.
Michael Nathanson, an analyst at MoffettNathanson, told Alphabet executives during the company call: “We’ve heard that there’s concern emerging that TikTok is a competitor to mobile location. of YouTube.
“The bears will likely point to weakness at YouTube as concerns grow about changing engagement and monetization trends at TikTok,” said Loop Capital analysts.
Loop’s Alan Gould brought the matter up with Facebook executives.
“You’ve been pretty open about competition issues on TikTok, which seems to be affecting the entire industry right now,” Gould said on the call.
Wehner touts Facebook’s homegrown products.
“I think it’s clear that short-form video is a huge opportunity for the industry as a whole and we are very pleased with the offer we have with Reels and the opportunity for us to compete for market share and time in the market. ,” Wehner said. “Obviously there are other competitors – there are strong offerings like TikTok, but we’re happy with what we have with Reels and the efforts we’re making to develop the important product there.”
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