Where is Everyone Advertising These Days?

WHOSE REVENUE JUST DECLINED FOR THE FIRST TIME EVER?

For the first time since it went public back in 2012, Meta’s revenue numbers are down.

It’s only a 1% drop, bringing their Q2 earnings in at $28.8 Billion, but the stumble raises questions about the state of the advertising industry and what it can tell us about the economy in general.

Digital advertising now makes up such a significant potion of marketing budgets that we can look at its momentum as an indicator of business’ willingness to spend. In recessionary times, it’s typically the ad budgets that are first to go. So, what does Meta’s miss tell us about the mood in today’s board rooms?

The people at Facebook would tell you that a major factor that has led to their slowdown is the Apple privacy update that continues to limit targeting and attribution capabilities. That may be limiting their ability to serve some targeted ads, but if that’s what’s slowing them down then the leftover ad budget must be going somewhere else.

For more clues let's look at Meta’s competitors - starting with Snap and Alphabet. Those 2 make up the core of the digital ad options that North American companies have relied on for the past several years, and they're each up about 13%. Those aren’t good numbers - both companies missed their revenue projections - but they continue to grow while Meta retreats.

If we broaden our aperture to consider where else that ad budget might be going, that’s when the cause of Meta’s nightmares starts to come into focus.

Amazon’s advertising business has gobbled up a significant portion of the market since its started aggressively going after ad dollars, reporting an 18% growth this quarter and almost $9 Billion in total ad sales. But the major threat on the horizon is TikTok, and it's clear why Zuckerberg is so obsessed with them - not only did TikTok recently cross a Billion active users, but they’re on track to triple their revenue this year to $12 Billion.

When Facebook first launched ads back in 2012, it was the only social game in town and rivalled only Google for its share of digital ad dollars. It’s enjoyed a meteoric rise as businesses have shifted their budget online, and pretty much all of us found that we were forced to dump a significant potion of our cash into Facebook Business Manager. Clearly, that’s no longer the case as advertisers have a buffet of options with increasingly interesting features.

So, should we look at the Meta earnings report as a canary in the economic coal mine? Hardly. Digital advertising as a category is up significantly, and it’s Facebook's failure to innovate that has led to its stagnation.

It's a cautionary tale for the rest of us - even today we may feel most comfortable continuing to buy the Facebook/Instagram ads that have always served us well, but behaviours have shifted. Just like the way we adapted from newspapers & radio to meet the rising digital opportunity back in 2012, smart advertisers are meeting people where they are and the fact is, that’s not on Facebook anymore.

Written by Conner Galway, Junction Consulting