Facebook entered the quarter after forecasting continued Q2 ad growth while warning that regulatory changes and Apple’s iOS 14.5 update would create second-half headwinds. Its prior quarterly report had already shown ad pricing rising 30% year over year alongside growth in monthly users.
The new results extend a longer shift from the 2019 Q2 advertising base, when ad revenue grew 28% year over year: Facebook’s current ad-revenue acceleration is driven overwhelmingly by higher prices rather than a large increase in ads delivered.
First-order effects
Facebook gains substantially more advertising revenue per delivered ad, with a 47% rise in average price accounting for most of the quarter’s 56% ad-revenue growth.
Advertisers buying Facebook inventory face sharply higher average ad prices while the volume of ads delivered rises only 6% year over year.
Second-order effects
Facebook’s sales organization can prioritize advertiser demand and campaign quality over expanding ad load, since pricing—not delivery growth—is carrying revenue growth.
The company’s stated second-half regulatory and iOS 14.5 headwinds put greater weight on its ability to sustain advertiser pricing as measurement and targeting conditions change.
Third-order effects
If price growth continues to outpace delivery growth, Facebook’s advertising model becomes more dependent on proving conversion value to advertisers than on adding inventory.
The pattern points toward a more concentrated auction market in which platform revenue is increasingly determined by the value assigned to each impression, even as privacy-related changes constrain targeting.
The trend: Large social platforms are shifting from inventory-led ad expansion toward price-led monetization, with advertiser measurement determining how durable that pricing is.
Facebook earnings: “Advertising revenue growth in the second quarter of 2021 was driven by a 47% year-over-year increase in the average price per ad and a 6% increase in the number of ads delivered.” It's good to be a monopoly. https://s21.q4cdn.com/...
Facebook earnings - there it is: “We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter.” https://twitter.co…
Here comes the CFO who has the important role of balancing the tension between freaking out investors and creating more liability for the likely class action lawsuit if/when privacy changes hurt them worse than forecasted. /9
Narrative violation: Facebook grew faster than Apple in the second quarter and profits are up 101%. Users also continue to climb. What scandals again? https://www.theverge.com/...
Outstanding thread on FB earnings by @jason_kint. It was a blowout quarter, but does not include impact from iOS 14.5, which is likely to be a big drag next quarter and beyond. Much deflection ... https://twitter.com/...
Apple ad tracking changes are having an impact FB on the near term. Eventually that goes away and Facebook finds a way forward even with the Apple headwind.
FUD, FUD, FUD, FUD, FUD, FUD, FUD, FUD....the only question that matters for Facebook today is: What percent of app users for Facebook Blue app, Instagram and WhatsApp respectively are opting out of Facebook tracking on Apple's iOS 14.5+ platforms when prompted by users????? /7
Sandberg has shifted back and forth from her normal pleas for small business, the benefits of “personalized ads” and innovation. I honestly don't think she's ever run a material business that doesn't depend on surveillance economics. /8
I would actually be much more interested in transparency around Facebook's ad revenue than reach for particular kinds of content. How much of FB's revenues comes from the long tail - from SMEs that never advertised at all before?