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| Google Ad Revenue Up, Despite Pandemic |
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| While global ad spending no doubt took a substantial hit in 2020, Google’s parent company Alphabet posted record revenue during last week’s Q4 earnings call — $56b compared to 2020’s $43.2b. $46.2 billion of that came from its ad divisions, a near 22% increase from 2019. Meanwhile, YouTube brought in $6.9 billion in ad revenue on its own, accounting for 15% of Google’s quarterly ad revenue. This 46% year-over-year increase can largely be attributed to direct response ads and brand ads. Google Search ads, meanwhile, generated a 17% rev increase of $31.9b. |
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| The big G acts a bellwether for the health of the industry, whether we like it or not. And after its first-ever reported decline in ad sales for Q2, some feel that the SSP’s banner year reflects well on ad rev rebounding writ large. An increased brand ad spend on YouTube also suggests that retailers are driving the demand, along with other companies capitalizing on the pandemic-instigated shift toward e-commerce as more of us buy absolutely everything online. These numbers also suggest that the e-commerce wars are still heating up, with battle lines drawn between Google and Amazon. On the earnings call, Google CBO Philipp Schindler said that the company grew its “merchant community” by more than 80% in 2020, adding that they’ve long wanted to make Google “the best place for users to start their shopping journey,” which amounts to shots fired at the house that Bezos built. In 2019, Amazon’s net ad sales swelled 20% to $281b, and even the pandemic-related spending cuts in 2020 didn’t impact its sales. On the contrary, Amazon has been growing considerably, with its ad sales up from $1b to $15b the past four years, and steadily chipping away at Google’s search revenue. This doesn’t mean that Google isn’t without an edge in the e-commerce game. The record growth of YouTube’s ad revenue in 2020 over 2019 — the first year G even reported YouTube revenue — reminds us that YouTube rakes in billions of ad dollars that other SSPs don’t even have access to. As Editorial Director Gavin Dunaway suggested last year, Google's proposed coookiless TURTLEDOVE solution will offer a similar play if auctioning and final decisioning moves out of the cloud and into the browser. On last week’s call, Google revealed financials on its cloud division for the first time — and it lost $1.6 billion in Q4. If that’s not enough of a reason for G to push TURTLEDOVE, we don’t know what is. A lot of ad tech folks are up in arms though over Google's recent announcement about FLEDGE, an experiment for operationalizing TURTLEDOVE that includes a “trusted server model” where Google would make itself the gatekeeper. Meanwhile, Google's claims that the-Chrome proposed cookie alternative known as FLoC, will be 95% as effective as cookies has prompted many to cry out ‘power grab’, especially since it infers that Chrome gets to access and store all user data to make this happen. It’s also worth noting that Google finished at a record high despite the threat of several looming antitrust suits, the most notable one detailing an alleged deal wherein Google favored Facebook as a digital ad partner over other platforms. And let's not forget to mention the Australian Competition and Consumer Commission's fight against the advertising giant for dominating market share throughout the supply chain. We’ll be watching to see if these suits actually make any dent in G’s ad revenue during the year. |
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| NYTimes Gets 20% of Rev From First-Party Data |
Last week, The New York Times reported that digital ads using first-party data accounted for over 20% of its revenue in Q4. That’s a year-over-year increase of 13%. Despite this, the legacy publisher’s digital ad revenue fell 2% in 2020 to $90.1m, although a .2% rise in revenue in Q4 ended the year on a hopeful note. Meanwhile, The Times also stopped running open market programmatic ads in its apps last year and closed two of its ad service businesses — Hello Society and Fake Love — all three of which netted a combined $28m in revenue in 2019. The pub’s prioritization of direct-sold over programmatic ads comes amid a record year for its subscriptions, too — 5.1 m digital news subscribers in Q4, along with 1.6m subscribers for its other subscription products like Crosswords and Cooking. |
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| Though The Times’ ad revenue ultimately declined in 2020 — driven in large part by a 39% decline in print ad rev — these numbers offer hope for many pubs that first-party data may become the holy grail of a cookieless advertising ecosystem. As the currently booming subscription trend sees more publishers like Forbes and Patch investing in the newsletter platform game alongside tech companies like HubSpot and Twitter, the allure of first-party data increases greatly. For one, first-party data provides more streamlined testing opportunities for pubs to understand what drives subscriptions. This DTC relationship is entirely permissions and consent-based from the outset, and, as we’ve recently said, “Who better to collect information and consent than the publishers themselves?” Of course, a complete snapshot using first-party data would require all users to log in, subscribe and/or get past the subscription wall. To that end, it’s still likely that first-party data won’t outright replace the Privacy Sandbox when third-party cookies are finally sunsetted. The Sandbox can still help pubs advertise to visiting guests, while loyal subscribers who provide first-party data will eventually become worth more than programmatic users. Either way, there are some wild cards at play this year. For one, the potential for subscription fatigue to take effect post-pandemic means it remains to be seen how sustainable The Times’ success with first-party data will be over the long term. There’s also the question around what level of trust the Sandbox ascribes to first-party data to begin with. As more details of the Privacy Sandbox became public, there are W3C members who maintain that Chrome dominates many of these discussions and decisions. Some members have challenged W3C’s proposed success criteria, pointing out that its security and privacy questionnaire “does not entertain the possibility that someone can trust the website publisher (first-party) and their supply chain (third parties). They assume the browser vendor must be more trusted than all other parties and must limit the role of third parties.” |
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| Ad Tech Consolidation Nation |
| There's been a flurry of activity with M&As in ad tech in the recent week. First, we heard that in an effort to challenge Amazon and Facebook's dominance over garnering SMB ad spend, Walmart acquired creative automation ad tech company, Thunder. This, following news of the retail giant's joining forces with The Trade Desk to build out a DSP. Walled garden anyone? Then there was the news that AppLovin was grabbing up mobile app measurement leader, Adjust. Which makes a lot of sense given all that's going on with IDFA. This news was shortly followed by news that in a move to bulk up its muscle in streaming ads Magnite is acquiring SpotX for $1.17 billion in cash and stock. Most recently, we learned that LiveRamp was purchasing DataFleets for over $68M, which will enable LiveRamp to take a more privacy-centric approach to targeting users and expand into Europe, Asia and Latin America. |
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| We're going to see a lot more consolidation over the year as a result of the Pandemic induced economic crunch. But we can't blame it all on COVID-19, can we? If you remember, at the top of 2020 there was similar consolidation activity in the ad tech space. And each year these deals continue to rise. Now with the changing mobile app landscape and death of the third-party cookie around the corner, things will be heating up at breakneck speed. All we keep thinking about is Google's claims that there is loads of competition in ad tech land. Not. Still, startups haven't been scared off from entering the space. The ones that are going to survive will do well by focusing on solutions that can help the industry figure out tracking and measurement in the future. |
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| Around the Watercooler |
Here's what else we're reading and listening to...
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