Online commerce helped boost digital ad platforms like Meta and Google

Major tech companies reported an increase in ad revenue in their most recent quarterly reports, driven by e-commerce advertisers that continued to spend on performance marketing.

Last week, Meta and Alphabet reported a 23% and 9% year-over-year increase in ad revenue, respectively. Meta clocked in $33.6 billion in advertising revenue during the third quarter, while Alphabet reported $59.6 billion. Google’s search revenue also grew at a faster pace of 11% to $44 billion. In the third spot, Amazon’s advertising revenue jumped 12% year-over-year to $12 billion during this most recent quarter. Meanwhile, smaller players like Snap returned to positive growth and reported a 5% increase in revenue.

Meta CFO Susan Li said the online commerce vertical was the largest contributor to year-over-year ad revenue growth, followed by CPG and gaming during the latest earnings call. Philipp Schindler, Alphabet’s chief business officer, said within Google Advertising, search and other, revenues grew 11% year-on-year, led by “solid growth” in the retail vertical. Put together, these numbers indicate that e-commerce advertisers are continuing to spend digital ad dollars on bottom-of-the-funnel advertising and performance marketing to drive up conversions.

“It’s all about the ROI that these ad platforms provide,” said Brad Jashinsky, director analyst at research firm Gartner’s marketing practice.

Jashinsky said within a walled garden like Amazon, in particular, there’s a very clear ROI that brands can see. “The whole path when you increase your ad spend on Amazon advertising, specifically on search ads. That’s where really great return on ad spend is happening. Same thing with Google and then same thing with Facebook. It’s all about high-performance advertising,” Jashinsky said.

Jashinsky said, “we see a lot of brands shift away from a lot of offline advertising, from top-of-funnel advertising on digital and shift more into the middle funnel, lower funnel or bottom-funnel where there’s a very direct correlation between ad spend and sales.”

Jeremy Goldman, senior director of marketing, retail, and tech at Insider Intelligence, agreed. “Retailers keep investing in bottom-of-the-funnel and performance marketing ad tools because they can justify it,” said Goldman. Goldman said it’s the same reason why retail media spending has accelerated — because the “payback period” for that advertising is “pretty quick.”

“And because of that, there’s less of a concern. For brands, top-of-funnel, and awareness is just a longer cycle to have that basically justify itself,” Goldman said.

For Meta, recent improvements to its ad platform likely helped its recent gains. Debra Aho Williamson, an independent tech analyst said that Meta’s newer initiatives in AI advertising are one of the factors helping drive its revenue growth. “Its Advantage+ product suite depends on AI to help advertisers optimize ads to meet their objectives,” said Williamson. She added that “Reels was another factor; it was on a $10 billion run rate as of Q2 and with every quarter that goes by, Reels is proving to be a stronger and stronger competitor to TikTok for ad dollars,” she added.

Meta’s Advantage+ shopping campaign tool is an automated ad product for e-commerce and retail advertisers to optimize campaigns that are converting, using artificial intelligence.

During its earnings call, Amazon CFO Brian Olsavsky said ad revenue was primarily driven by Sponsored Product ads as Amazon leans into machine learning to improve the relevancy of the ads it shows customers and enhances its measurement capabilities on behalf of advertisers.

Credit: https://www.modernretail.co/technology/online-commerce-helped-boost-digital-ad-platforms-like-meta-and-google/

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