Facebook announced second quarter earnings this afternoon. The company posted revenues of $4.04 billion and beat analyst consensus revenue estimates for the quarter by about $50 million. Earnings per share also beat estimates but relatively narrowly. The bulk of quarterly revenue came from…
Instagram will generate almost $600 million in ad sales this year, according to eMarketer's first report on the photo-sharing mobile app. The research firm also predicted Instagram will earn $2.81 billion in ad sales by 2017, outselling Google and Twitter when it comes to U.S. display ads.
"We expect to see rapid growth in Instagram's ad revenues this year and throughout the forecast period—driven by high demand for the social network's new ad products, which will expand beyond branding to include direct response, the ability to buy ads via an [applications programming interface], and enhanced measurement and targeting features," eMarketer said in its report today.
Facebook is set to announce second-quarter results on Wednesday, but it does not break out how much money Instagram makes. The eMarketer numbers appear optimistic, and today a research note from a Wall Street bank prognosticated around $2 billion in Instagram revenue by 2017.
"Monetization is moving at a 'measured pace,'" wrote Robert Peck, an analyst at SunTrust Robinson Humphrey.
With WhatsApp and Oculus Rift in the mix, Peck also predicted Facebook would be able to turn all these businesses up, however. And then there's the main business—Facebook proper.
Facebook is expected to report $4 billion in revenue for the second quarter this week, with ad revenue growing about 15 percent year over year.
For some men, the mere idea of wearing shorts is cringeworthy. But e-commerce site Chubbies thinks it's found its niche among millennial guys online.
The retailer began in 2011 with the mission of "revolutionizing shorts," and it sells swim trunks and shirts in addition to its trademark elastic-waist shorts. The brand primarily targets young guys who like to make the most of weekends with friends. And in today's marketing world, that means Chubbies had to build a strong social media game.
"As we envision the future of what we're up to, it is a full-on media organization that's rooted in content," said Tom Montgomery, co-founder and head of marketing. "In the same way that the Red Bulls of the world have made that association with extreme sports, we want to align ourselves with the weekend."
About 40 people work at Chubbies, with three employees specifically cranking out posts for Facebook, Twitter, YouTube, Instagram and Snapchat.
Video is a big part of the brand's social push, which has shifted significantly from YouTube to Facebook over the past few months. Underscoring Facebook's rise as a video player, a side-by-side comparison between Chubbies' Facebook and YouTube channels shows wild differences in how the brand's social videos take off.
On Thursday, for example, the retailer posted a 30-second spot to Facebook and YouTube. By Friday morning, the Facebook version had racked up more than 11,000 views and 350 likes while the YouTube clip had 300 views and 2 comments.
Another video of men squeezed into pairs of small shorts was posted to Facebook on June 19. It has since amassed more than 900,000 views, 3,600 likes and nearly 1,000 shares.
The clip was later posted to YouTube on July 15, where it's drawn 3,100 views and a small handful of comments so far.
Those quicker clips are paying off. Over the past three months, the brand's accumulated 12 million Facebook views and is adding 10,000 new fans per week. The Facebook page has 1.1 million fans.
It's important to note that Facebook and YouTube count views differently. On YouTube, someone has to watch 30 seconds of something to be considered a view. But on Facebook, a view is counted as three seconds and automatically starts when someone scrolls through a news feed.
Views aside, Montgomery said engagement with the clips is also stronger on Facebook.
"At the moment, we're seeing by far the most excitement on Facebook because they [users] own the share, they own the traction," Montgomery said.
Of course, part of that also has to do with ads. Once Chubbies sees a video or picture start to gain popularity, it buys sponsored posts that target similar audiences and zeroes in on people who previously looked at its content.
Chubbies' marketing budget is almost entirely digital, amounting to less than 15 percent of the company's revenue.
That means it uses platforms like Instagram and Snapchat—which require pricier ads—primarily for branding.
"We put a lot of emphasis on video content because we've seen that be the more sharable, the most talkable of the content that we put out," explained Montgomery. "It all comes back to digital right now. It's figuring out how to make the integrated campaigns out of stand-alone traditional campaigns."
Jamie Byrne is a bridge builder. As director of content commercialization, the YouTube veteran is charged with pairing creators with the brands he hopes will bring advertising dollars to the platform. On day one of VidCon 2015, the annual confab of YouTube creators and fans in Anaheim, Calif., we sat down with Byrne to talk about how the Google company builds its relationships, competition on the horizon, and the spectacle that is VidCon.
Adweek: You've been with YouTube since 2006. Did you ever expect to see something like this? A conference of thousands of teenagers chasing after their favorite YouTube stars? Byrne: When I joined the company, I knew something special was happening. But it was so early, there were only a handful of creators on the platform. There were less than 40 million views a day [current estimates top 4 billion]. The most exciting for me having been here nine years is seeing the platform grow. We're 10 years in. We're a mature company. But we're growing much faster.
You're tasked with bringing in new advertisers. What's the biggest challenge there? When you look at VidCon as a proxy. If you were here 4 years ago, there would be one brand here. And today we've got a hundred brands that are here to see the experience.The CMOs are bringing their kids because the kids want to come and meet their favorite YouTube stars. We've seen an incredible shift overt the last three of four years in terms of brands receptivity to YouTube. As an industry our biggest challenge now is continuing to shift dollars from television into video.
Facebook is making a real run at YouTube, from the creator side and from the advertiser side. Even GoPro is going to offer a user's footage and license it to advertisers. How do you see the challenge from these platforms? Ultimately, if we're trying to build an industry and if we're trying to shift billions of dollars from television into online video, that's not something one company is going to do alone. We see the entrance of other folks into online video as, one, a validation—we've been doing the right things for the last 10 years—but also it's going to convince all these brand marketers that their audience is shifting and they need to start thinking about their advertising. We see this as an all-boats-rise kind of situation.
YouTube is bringing on Susanne Daniels from MTV, where she was head of programming, for the new position of vp of originals. It's clear the audience MTV once owned is now gravitating to YouTube, and other digital platforms. What do you think is behind the hire? Originals is something that is really important to us. We've been investing in the space for the last four years with original channels and then more recently with originals strategy, which is really focused on our biggest creators. Susanne is a really accomplished programmer. She has a great track record of developing amazing content for MTV, and we're super excited to have her here to help us.
Between six-second Vines, Facebook autoplay and skippable YouTube ads, marketers are navigating new digital video spaces almost daily. Spearheading that change are agency creatives like David Droga, who are shifting from making television spots to digital videos and figuring out what works best on each platform.
Droga, founder of his namesake agency, Droga5, knows a thing or two about building breakout digital campaigns for clients like Under Armour and Newcastle and recently helped YouTube's ad team make a new spot that breaks down the space for marketers.
Adweek talked to Droga about the growing competition in online video, what it means for agencies and how brands need to move on from viral videos.
Adweek: There are so many types of digital video out there for marketers right now. How does that change how creatives work? David Droga: Creatives have to be more valuable and open-minded about things. Back in the day, there was a certainty of mediums and time length, so creatives were trying to perfect one thing over and over. But you couldn't be as original.
Now, the canvas is three-dimensional, and you can play in interesting spaces. I feel like that's exciting, and intimidating, for a lot of creatives.
In YouTube's video, you talk about TV having a definitive beginning and end. So, how does that change with digital video? Sadly, a lot of brands still look at digital video as just basically uploading something they produced for television. Or, they produce something that still smells like a television commercial.
When you think of the context [of digital], creatives have to really put more thought into why would [someone] watch it, and why would they share it?
I like the thought that when you're creating [for digital], the reaction that you want people to have is baked into your concept—it has to be. You have to embed that into your strategy and your creative idea.
Agencies are obviously obsessed with figuring out the context of how a video is being watched, but do brands care? There isn't a client in the world who doesn't want to create something that goes viral. But going viral is not a strategy, so you have to look beyond that.
People like to reference things that have had success online. It gets difficult because half the reason things hit a nerve or become popular might have been about a moment in time, and you can't be original or go to new places if you're following someone else's footsteps. The idea of emulation, particularly online, is a flawed strategy.
You've been vocal about hating pre-roll, but does that change with new types of interactive video ads or autoplay? Brands can't just produce something in isolation anymore. The best story doesn't win just because it's a great narrative.
Creatives just have to think more upstream and further downstream and also think about the ramifications of the piece.
I think advertising has moved from just telling you something to hopefully asking you something. And that ask can be really simple—it can be about forwarding something, [which] is more important than views. Views can be bought.
There's also a huge video war going on right now between Facebook and YouTube that we need to talk about. What do you make of that? Competition is a good thing. I feel like if it forces both of them to innovate more and be more compelling in favor of the consumer, then we all win.
More content on the consumer side [means] better content that we can create. Even if it's less content, we'll just make content that's produced better.
What do you think about vertical video and the things Snapchat is trying to do with agencies? I'm sort of wait and see on that one, actually. I don't really have an opinion on that.
I'm fascinated by what they're going to do with it, and these platforms that have huge audiences that they want to monetize by getting brands seamlessly in there. But, it's hard to do without polluting the reason that people are talking on these things.
In the video, you also talk about how brands should not turn off YouTube comments, which seems like such an old-school thing to be concerned about nowadays. It's hilarious because [marketers] want to enjoy and be part of the social conversation, but they do it in a half-hearted way.
You can't have your cake and eat it. You have to hold yourself accountable to the social commentary and stand by what you say by the nature of wanting to have a two-way dialogue.
What do you see coming up that's going to be most interesting in video a year from now? [Laughs.] I wish I could predict what's going on tomorrow.
I think, [it's going to be] less stuff but better stuff. I feel like understanding how the consumer is viewing and sharing stuff is more important than TV that's repackaged online.
Consumers don't want to interact with brands as much as brands think they do. Sometimes, the brands that have the most restraint are the ones that have the biggest impact.
Social platform BumeBox started hosting live Facebook chats for brands like VH1 and Discovery Channel back in October, as an alternative to the Twitter Q&As that brands typically organize. For example, Sony Masterworks set up a real-time chat on Facebook to promote a new album from artist Jackie Evancho last fall.
Now, MTV and iHeartRadio are plugging video into those virtual meet and greets.
Late Thursday afternoon, MTV set up a Facebook chat with Teen Mom 2 star Kailyn Lowry to talk about her show. And last week, iHeartRadio ran a Facebook Q&A with YouTube singer Max Schneider. He responded to eight questions from fans in one hour with short video clips.
It's all part of Facebook's plan to turn the site into a video platform for brands, publishers and creators. Clips are uploaded straight to Facebook through BumeBox's platform with a branded logo at the top of the screen, similar to what Periscope streams look like.
The social videos aren't technically streamed since they are uploaded, but the idea is to crank out responses through clips quickly, similar to how brands use Periscope and Meerkat to answer questions in real time.
Unlike Meerkat or Periscope, though, the videos are saved and posted to brands' pages, which Chris Williams, iHeartRadio's chief product officer, said is a major differentiator.
"What BumeBox allows us to do is start a conversation with the fans in our Facebook feed hours or days in advance, set the appointment to connect, and by the time the artist joins in, we have built anticipation and curated the best content for a compelling conversation," he said. "Because of the way the video is published within the chain of conversation, it gives even greater opportunity for the interaction to be shared by fans pre-event, during, and post-event."
Facebook's display-ad success was perhaps the most compelling story, however. Its ads appear to be resonating with users more than Google's, according to Tamara Gaffney, principal analyst at Adobe Digital Index.
"There have been radical changes that Facebook has done and less radical changes Google has done," Gaffney said. "And consumers in the marketplace are feeling ads on Facebook are more relevant."
Facebook ad impressions were down 50 percent, but clickthrough rates doubled. That means Facebook is getting fewer but more valuable ad impressions.
Google's clickthrough rate was up 24 percent on display ads in its network and on YouTube. It all comes down to relevance—a survey found that 51 percent of users said Facebook ads were attuned to their interests, while just 17 percent said the same of YouTube.
Adobe looks at a trillion ad impressions each quarter and 20 billion social-media visits, so it can sample a broad swath of online marketing. It can measure ad costs and clicks, social-media referrals to retailers, and visits to sites. Here's a look at the rest of the findings:
Periscope, the video-streaming app Twitter acquired, has generated three times as much traffic as rival Meerkat since its launch in late March, according to Adobe, and the disparity is growing.
A Facebook retail referral is the most valuable, generating on average 91 cents for each user sent to an e-commerce site, but that represented a 17 percent decrease from last year.
Pinterest's referral value dropped the most—25 percent in a year—to the point that the average user is worth 51 cents to the retailer, down from 68 cents.
Twitter went in the other direction in terms of social referrals, with the value of a referred consumer rising 63 percent to 65 cents.
Surprisingly, Reddit is making strides as a referrer of retail traffic, increasing the value 80 percent and making the average visit from Reddit worth 34 cents to retailers.
Reddit is in the middle of a leadership change and user uprising. Its interim CEO Ellen Pao resigned last week after users vented about policies at the company, which is very much dependent on its active community. The publicity thrust Reddit into the spotlight, and social-media mentions about Reddit tripled at the beginning of July, when the user-generated outrage began.
Last quarter was the first time the impact of Google's search changes that downgraded sites not designed for the mobile Web were measured. The changes were called "Mobilegeddon" because of fears that ill-prepared sites would see a drop in traffic. Well, they did, according to Adobe, which found sites lost up to 10 percent of their traffic if they did not meet Google's mobile standards.
The reasons behind "Mobilegeddon" were also evident. Mobile advertising is still not as valuable for Google, and pressuring websites to perform better on mobile could increase the value of clicks. Desktop search ads cost 37 percent more than those on mobile, according to Adobe.
Mobile search ad costs per click did rise 16 percent, but clickthrough rates were down 9 percent.
For the first time, Adobe did project Google search revenue, saying it would increase 1 percent to 2 percent year over year. In the second quarter of 2014, search revenue was up 4.5 percent from the previous year.
A quartet of executives from Facebook, Snapchat, Twitter and Pandora gave advertisers tips on how to reach millennials during a panel at ZenithOptimedia Group's Mobile Day in New York on Tuesday.
Marketers are constantly working multiple social media platforms and tweaking digital ads to target elusive millennials—adults ages 18 to 34 who don't respond to traditional advertising and are increasingly "cutting the cord." But instead of focusing on how young adults are turned off by ads, the speakers suggested spending more time analyzing how they use digital media, and then building marketing strategies around it.
"When we think about millennials, we don't think of them as a segment," said Trevor Johnson, director of Facebook's global agency team. "Millennial behavior is a thing that is really driving social and technology behavior going forward."
Here are four interesting insights the digital players revealed.
1. Get local
Steve Hwang, director of operations and strategy at Snapchat, said brands should think "local" when targeting millennials.
Granted, that's a sales pitch for his company's Live Story feature, which curates streams about nearby events that brands can buy full-page placements in. But the bigger idea is that Snapchat's core group of 18- to 24-year-olds hate feeling like they're being marketed to. Instead, they want to watch videos and look at photos their friends are sharing.
That approach is completely different than how brands use Facebook and Twitter to grow followers, a point Hwang later used as a jab against Facebook.
"Authenticity is really important, and I don't mean in terms of pretending to be [someone's] Facebook friend," Hwang said. "There's a ton of opportunity for brands to be involved on a more local level in the real world."
It's no surprise that autoplay video has taken over Facebook, but that doesn't mean brands are building the right type of social clips for the platform.
Facebook's Johnson advised the room of brands and agency execs to make four-, eight- and 10-second videos that grab young people's attention in a news feed. Once people tap on a video, the sound automatically kicks in, which helps hook them to watch longer clips.
"You have maybe the first three seconds to stop people in their feeds to get them with a piece of content," explained Johnson. "After that, they can either watch five seconds or 10 minutes."
3. Find social's new celebrities
Vine stars are hotter than Hollywood A-listers for millennials, said Stephanie Prager, agency development lead at Twitter.
So those are the people that brands should try to emulate or work with when posting videos, photos and GIFs to the microblogging site. And with the acquisition of social talent agency Niche earlier this year and the launch of live-streaming app Periscope, Twitter is likely to make influencer marketing a bigger part of its pitch to advertisers in the coming months.
"We see these influencers with followers and a social graph that is far bigger than any celebrity out there," Pranger said.
4. Data-backed creative
Despite all the talk about mobile's lack of creative, Pandora's svp of consumer packaged goods sales and strategy, Tamara Bedrosian, argued that data should determine what an ad looks like.
For example, women ages 18 to 34 like to listen to YouTube violinist Lindsey Stirling on Pandora. They're also overwhelmingly listening to her from the music-streaming company's app (80 percent of Pandora's 80 million active users listen on mobile). Those nuggets of information can shape a campaign and determine if it should run on mobile or desktop.
"We don't go out with mobile-first or mobile-only strategies," Bedrosian said. "Tailor your creative message to the environment and mindset."
Facebookrevealed Wednesday that it cleaned up its cost-per-click pricing model, much to the delight of marketers who were tired of paying for ads after viewers merely tapped the "like" or "share" buttons. Indeed, advertisers, if they choose, can now select buying options so they will only be charged for promos when clicks include website visits, the "Shop Now" button, mobile app installs and video views.
Keywee CEO Yaniv Makover and other industry players believe the move will be a boon to Facebook's ad sales as well as the attention paid to creative for the site's promos, particularly when it comes to branding-minded marketers.
Makover predicted the spending increases "will be significant" among packaged-goods companies and automotive brands. If he and his peers are proven correct, the social media giant's investors will be thrilled since its ad sales growth rate was starting to slow during the first quarter.
"Now that Facebook CPC actually refers to cost per website click, brands will feel like they are comparing apples to apples [with other platforms like Google]," Makover said. "They are going to be spending more money on Facebook."
He also noted that "the new CPC rates are going to be a lot higher compared to the old CPC. So if you were paying 5 cents for a click, now you will be paying around 16 cents."
Indeed, these kinds of paid social promos don't appear to be getting any cheaper. Though David Deal, a Chicago-based digital marketing consultant, said we'll see an increase in brand spending on Facebook ads—on one condition.
"Focusing on click-throughs will make Facebook more valuable so long as Facebook can deliver targeted audiences to brands," he said. "It's not enough for Facebook to drive more traffic to a website. Facebook needs to consistently deliver well-defined and desirable audiences."
He then added, "The change in Facebook's pricing configuration is further evidence that social media is morphing into a direct-response play for brands. We've already seen Facebook, Instagram, and Pinterest introduce buy buttons recently. Likes and shares are less important than commerce."
Omer Shai, chief marketing officer at Wix.com, largely concurred.
"This change will help draw even more direct-response marketers to Facebook since it purifies the traffic-acquisition process and guarantees that every dollar spent on [the platform] will now lead the user to the funnel marketers are promoting," he said.
It's hard to argue against platforms like Facebook giving advertisers better tools to meet their goals. Twitter underwent a similar development last year, letting brands pay only for consumer interactions that align with their actual marketing aims. And Google's display advertising system is set up similarly.
Interestingly, Shai and others suggested that the new CPC model will also improve Facebook ad creativity.
"Think about it, if you're trying to lead users into the funnel and avoid paying for social actions, you'll probably use very clear-cut creative now with this change," he said. "I'm sure we'll start seeing ads that are really pushing the boundaries."
And Deal, the consultant, remarked: "The focus on click-throughs will pressure brands to make more effective creative ads on Facebook. Compelling people to visit you or buy from you is more challenging than convincing someone to simply like your ad. Brands will need to work harder to benefit from direct-response ads."