Facebook and Twitter see ad revenue climb amidst pandemic headwinds

Facebook has reported a 22% increase in ad revenue, from US$17,383 million in 2019 to US$21,221 million, in the third quarter of 2020. This comes despite the ad boycott Facebook faced earlier in the year, with major brands such as Microsoft, Lego, Danone, Mars, Volkswagen Group, Diageo, and Coca-Cola temporarily pausing their advertising on the platform.

Additionally, the social media giant saw an increase of 12% in its daily active users, which it recorded an average of 1.82 billion for September 2020, an increase of 12% year-on-year. It also saw growth in its monthly active users, recording a number of 2.74 billion users, which is also an increase of 12% year-over-year.

Facebook said in its financial report that it expects its fourth quarter of 2020 year-over-year ad revenue growth rate to be higher than its reported third quarter 2020 rate, which will be driven by continued strong advertiser demand during the holiday season.

Facebook attributed COVID-19 to its growth, believing that the pandemic contributed to acceleration in the shift of commerce from offline to online. It also experienced increasing demand for advertising as a result of this acceleration.

Mark Zuckerberg, Facebook founder and CEO, said: "We had a strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times.” He added that Facebook continues to make significant investments in its products and hiring to deliver new and meaningful experiences for the community around the world.

Zuckerberg also added that considering online commerce is its largest ad vertical, a change in this trend could serve as a headwind to its 2021’s ad revenue growth. Facebook also expects more significant targeting and measurement headwinds in 2021. This includes headwinds from platform changes, notably on Apple iOS 14, as well as those from the evolving regulatory landscape.

Meanwhile, Twitter also saw a jump in ad revenue, posting a 15% increase in ad revenue to US$808 million during the third quarter of 2020, as a result of improved demand toward the end of the second quarter continued throughout the third quarter. This comes as advertisers used the platform to engage the audience around the return of events and previously delayed product launches.
 
By region, US advertising revenue totaled US$428 million, an increase of 11% compared to a decrease of 25% last quarter, and international ad revenue was US$381 million, up 20% compared to a decrease of 20% last quarter.

Twitter witnessed a broad-based global rebound, driven by an upswing in advertiser sentiment for digital ads in general and for Twitter’s solutions, the resumption of more events and product launches, and continued strength in markets that saw earlier recoveries from the pandemic.
By ad objective, the company said revenue from performance products grew faster than overall ad revenue. Meanwhile, total ad engagements increased 27%, driven by strong growth in ad impressions due to its growing audience and increased demand for ads. Cost per engagement decreased 9%, driven by price decreases across most ad formats. According to Twitter, CPE is an output of its ads auction process, and will vary from one period to another based on geographic performance, auction dynamics, the strength of demand for various ad formats, and campaign objectives.
 
Overall, Twitter saw a 14% year-on-year increase in revenue to US$936 million, with its international revenue forming US$424 million, an increase of 18%. Meanwhile, Japan remains its second largest market with a revenue of US$132 million, an increase of 3% in the third quarter, while total US revenue was US$513 million, marking a 10% increase.
 
Data licencing and other revenue amounted to US$128 million, an increase of 5%, driven by continued growth in developer and enterprise solutions. Overall, Twitter's operating income totalled US$56 million, comprising 6% of its total revenue, compared to US$44 million, or 5% for the same period in 2019.
 
Its average monetisable daily average user grew 29% year-over-year to 187 million, driven by global conversation around current events and product improvements. Meanwhile, its average monthly daily average user grew one million sequentially. Its monthly daily average user for international markets was up by 32% and in the US it was up by 20%. According to Twitter, the increase was primarily driven by factors including increased global conversation around COVID-19, the run up to US elections, and other current events.


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