← Behind the Numbers: an EMARKETER Podcast
Behind the Numbers: an EMARKETER Podcast
Behind the Numbers: Meta’s AI Investment Strategy, Snap’s Growth Secrets, and Why Pinterest Deserves More Attention
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- [00:00]
Marcus
Closing the intelligence gap between data and insights is the key to transforming marketing from a cost center into an engine for growth. But where to start? The age old question. Well, you can find the answers in Zeta Global's latest playbook, Driving growth in the AI era. I read the whole thing. 18 pages is really good. Download it today, it's free.
- [00:27]
Danny Konstantinovich
Hey gang.
- [00:28]
Marcus
It's Monday, February 24th. Minda, Danny and listeners, welcome to behind the Numbers email podcast made possible by Zeta Global. I'm Marcus. Today we'll be checking in on Meta, Snap and Pinterest. We really should be talking about stop signs. Do we need them? Do you ever get used to stop signs, America? Been here for a long time and I still hate them. I like the idea of slowing down for people and. But put a roundabout in traffic circle.
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Danny Konstantinovich
So you like the idea of a stop sign, but what, you don't practice?
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Marcus
Yeah, I try not to observe them. That's not true. I just think around about safer. Like statistically there have been studies apparently, but they're safer anyway.
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Minda Smiley
I don't think about stop signs that often.
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Marcus
That's because you have a life, Linda.
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Minda Smiley
Fun fact. I have not driven a car since 2019, so.
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Danny Konstantinovich
Wow, that's great. I hate to drive.
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Minda Smiley
I hate driving too.
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Marcus
So because of stop signs, that's the problem?
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Danny Konstantinovich
Exactly.
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Marcus
No fun for the discussion. Not just about stop signs, but about social media. People. We have two people with us. Those two voices you just heard, those two faces that you can see if you're watching us on YouTube or Spotify. We have with us our senior analyst covering social media, based in New York, it's Minda Smiley.
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Minda Smiley
Hello.
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Marcus
Hello there. And we have senior editor of the Marketing and Advertising briefing based in the same town, it's Daniel Konstantinovich.
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Danny Konstantinovich
Hello. Yes. The same small town.
- [01:51]
Marcus
Today's fact, bananas are berries. Strawberries are not. Botanically speaking, which is not how people talk. This one's really just distressing. So Stanford University said this, so it must be true. In botany, a berry is classified as a fruit. Comes from a single ovary of a flower, has fresh, has fleshy pulp and contains seeds inside. No pits or. Or thick outer shell to speak of. Then what are we doing with the strawberry name?
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Minda Smiley
Yeah, I also just can't wrap my head around a banana being a berry. That's crazy.
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Danny Konstantinovich
Feels wrong. Berries gotta be small, it's gotta be compact. Yeah, banana's too big.
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Minda Smiley
Yeah.
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Danny Konstantinovich
Yeah, that one hurt me too. It really took a lot of wind outta me. Like. Right?
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Minda Smiley
I already.
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Marcus
Oh, you've known this the Whole time.
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Minda Smiley
I feel bad about this.
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Danny Konstantinovich
No, no, when you said it, I was just like, ugh, that's distressing news.
- [02:49]
Marcus
Like you said, and yet somehow not as bad as stop signs. Anyway, today's real topic, the social media guys. All right, folks, we're talking about the social media people. Meta, Snapchat, Pinterest, and we'll talk about them all. But we'll start with the biggest one, it's Meta. Two years ago, Meta's revenue growth was dead in the water, believe it or not. Negative 1% for full year, 2022. Hard to wrap your head around given how they've been performing the last two years and the few years before that, that was 2022, negative 1% growth, ad revenue growth, 2023, they spiked to plus 16% year on year. And then 2024, the social giant achieved 22% growth. So staircase up and to the right quite aggressively the last couple of years. Slice of pie is what we're playing throughout the show. We'll start with it for Meta creating a pie chart as to the three reasons why Meta was able to reach this remarkable rate of ad revenue growth in 2024. Minda, go fast for us.
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Minda Smiley
Yeah, sure, yeah. I mean Meta had a great quarter and I think in terms of the pie chart, I would say the majority of that 70% probably just goes to the can be contributed to the fact that they just have built a very strong ad business and the AI investments they've made there, whether it's for their algorithms or ad targeting, are just really, just really paying off. And already Meta was a huge ad business. It has been a huge ad business quite time and I think those investments are just really supercharging that. And then, you know, more broadly, I think we're just seeing more ad spend go to social in general. You know, I know our forecasts are predicting double digit growth for social ad spend. So Met is of course as the biggest player and that is of course benefiting from that. So, you know, really that's, that's the big one for me. I think in terms of my other two, you know, slices of pie, I would say some probably can be Contributed to the TikTok uncertainty we were seeing at the end of last year. You know, that was right before, you know, the, you know, the uncertainty around the ban. Of course there's still uncertainty around the TikTok ban, but in December we really didn't know what was going to happen or how things were going to play out. So we, I'm sure Meta benefited from That a little bit, and then, you know, kind of going off of that. So I would give that about, you know, maybe 15%. And then the other. I'm trying to make sure my math is adding up. Maybe the other 15% would just go to the fact, you know, kind of going off of that. The fact that I do think a lot of creators have been slowly shifting more and more resources to Instagram, even to Facebook, as they sort of prepare for the uncertainty around TikTok. And so I'm sure Meta also saw some tailwinds from that as well.
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Marcus
Okay, Tanya, how does your pie chart line up?
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Danny Konstantinovich
Mine looks fairly similar. I have less pieces of the pie, but not because I think that any of the things Minta said are not as important. But I. I gave the biggest chunk of the pie, like 66% or 70% to all these AI advertising initiatives that the company has. The AI investments, like Minda said, have definitely helped with targeting and content delivery, but I think something that it has also done that's benefited the company a lot is really opened up a huge pool of spending from smaller brands and advertisers. A lot of the AI tools are aimed at reducing the barriers to entry in terms of making an ad. Making an ad that can run across, you know, Instagram and Facebook. You don't have to, like, specify a, you know, a certain platform. If you have a video ad, it can be repurposed to run on other parts of its ecosystem. I think that's really opened up a whole world of spending that this company is really benefiting from.
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Marcus
Yeah, that's a great take.
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Danny Konstantinovich
Yeah. And I think. Well, I just said yes. Yeah, that is a great take. Thank you, Marcus.
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Minda Smiley
Yeah.
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Danny Konstantinovich
Marcus, another thing that I have here, which almost could be wrapped up into the AI investments are developments to Advantage plus ad format that Metta has. They made Advantage plus shopping campaigns a big focus in the last quarter of the year. You know, it overlaps with the holiday season and a big Cyber five period. And, you know, they saw price per ad jump a pretty significant amount. I think it was 14%. Just shows that there's strong demand for this ad format among retailers or E commerce brands. Yeah, I think that AI is really helping this company out a lot.
- [07:29]
Marcus
Yeah, yeah, they sound good to me. And I was just looking at the raw numbers for Meta as well. They're still adding users at an insane clip. In the US we don't really think of it because it's the US and you've got to see ceiling at some point. But the company added 160 million people to its app. So Facebook, Facebook Messenger, Instagram and WhatsApp, that's half the population of America it added to its user base in the last 12 months. And so it's not reporting, you know, Facebook users anymore. It never really told us about Instagram users until it hit certain milestones. But it is reporting this kind of family daily active people number how many people use all of the Meta apps and that's still growing an astonishing rate. So that's going to help push things forward. It's as ads are costing more as well, which is helping the company Q4 2023. Meta's average price per ad had grown 2% year on year. This past Q4 it was up to 14% and the all important US and Canada that's driving that. It was plus 2% a year ago, plus 12% this year. So the price of its ads are helping to boost its revenue as well. What do you guys think of Daniel? First to you first. So Meta's AI spending plans, good or bad? Dear friend of the show, former workmate Deborah Arho Williamson, founder of and chief analyst of Sonata Insights, was saying, quote, meta's solid revenue growth in Q4 masks a looming problem. Its revenue outlook for Q1 was lighter than Wall street was expecting and it is planning exorbitant capital expenditures over $60 billion for AI infrastructure in 2025. That adds up to a concerning situation. Close quote. What do you make of its planned AI investments?
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Danny Konstantinovich
I'm a little torn on it. I think it's kind of uncertain how it will play out. I know that. I was just saying that investments so far have been a big success for the company and I definitely think that's true.
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Marcus
Or Deep Sea kicked the scene and changed the thinking, the math on AI investment.
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Danny Konstantinovich
Yeah, I think it's definitely harder for, you know, post deep seek for a company like Matter to justify the huge spending on AI. And some of the statements that Zuckerberg made during the earnings call I think are also interesting. He, he said the company expects to have a billion Meta AI users by the end of the year, I believe, which is a huge number. I mean they could theoretically get to that fairly easily if they just really surface this feature to a bunch of users. You know, they could certainly do that. But I think the bet there is that Meta AI can drive revenue in some way, that it can be a significant ad vehicle and it's certainly possible, but you know, we haven't seen that proven yet, I suppose. And all of these other AI you know, user oriented AI features that are launching at other digital ad companies like Google. With AI overviews, we don't really have a sense of how much revenue those features are adding to what the company is already making.
- [10:26]
Marcus
Luckily, net income is doing good things for them, so that's probably calming things down one side whilst terrifying investors on the other. With these kind of investments in, in capex, net income, $21 billion in Q4 in just pure income and that's high, but it's 50% higher than the previous year. For the last five quarters it's kind of been hanging out in the 12 to 15 billion range. So this is a market kind of step change going up above 20 billion for the first time in a while.
- [10:57]
Danny Konstantinovich
Yeah. If I could just say one more thing about meta AI. You know, I think it's important to clarify that this spending is not all going to the AI assistant. I'm sure, you know, it's going to be spread across company and there are, you know, they are communicating things about their goals with meta AI that I think are setting up the idea that it will be eventually a strong vehicle for advertising. They've talked a lot recently about how this assistant will have like a deep memory and will store, you know, the conversations it has with users, like very specifically and, you know, if they can get users to engage with this as much as the company is hoping that they will, that personal assistant will have theoretically a lot of intimate knowledge or data around specific users that can make it a good place to target ads. But as a counterpoint to my own point, the question is, if you're asking this AI assistant for recommendations or for help or whatever, and it's delivering you sponsored results, does that reduce the utility and desire to use this feature? Like it's a careful balance to walk and we haven't seen any company come out on the other end of that yet. So, you know, like Minda said, it is very abstract. It's just hard to picture what the end result there looks like.
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Marcus
Yeah, yeah, Playing devil's advocate with yourself. You're all over the place, Danny, but great points. Let's move to Snap. Last year, Snap's revenue growth was also dead in the water. 0% for full year 2023. This year it grew 16%. So again, quite the turnaround. Slice of pie. Mindo, I'll start with you again creating a pie chart. Three reasons max, why Snap was able to bounce back in 2024.
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Minda Smiley
Yeah, for sure. I mean, I would say about 60% definitely. Majority just goes to the fact that they've been working on strengthening their ad platform for quite some time and it is paying off clearly. I mean they saw double digit revenue growth and so I think that's a big, big part of it especially when it comes to small businesses, especially when it comes to lower Funnel. So I think know just the fact that they've really been investing is a big reason why we saw that jump. I also think Snapchat plus, you know, it's still a small part of of their mix but they're certainly seeing a lot of momentum there. I want to see that. I want to say that they said that they're expecting an annualized revenue run rate of 500 million which you know, for Snapchat that's not small potatoes. So you know, I think they're there. It's kind of a slow burn but I think they are. I'm really seeing some success there with Snapchat plus and they're investing in it and I think we're going to see, you know, we're seeing growth, revenue growth from that and we will continue to more in the future and I think so I would give that about probably 25% in terms of just why they saw some growth this year and then I would say the rest probably would go to just the fact that they've invested. Snap's an interesting one. It feels like they always are rolling out a lot of ad formats. They seem to have a really experimental test and learn mindset. They are constantly rolling out new ways for advertisers and brands to jump in. Creators as well. They've definitely been investing in creators especially in light of the TikTok stuff. So I think they're just, you know, they've been able to attract brands in that way as well.
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Marcus
Danny, what about yours?
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Danny Konstantinovich
Yeah, I have a similar split. I think I attributed about 50% to, you know, I could probably split this 50% into 2:25 because I have two things. I have an. And joining something else with this 50%. So one of those is like Minda said, focusing on smaller businesses and down funnel clients. You know, Snap said at some point in the second half of the year that and which is something that a lot of companies said that they are focusing less on these like big, you know, top of funnel clients who have a lot of competition for spending and can be pretty volatile, you know, like the biggest of the big name brands that you or I could think of. And they're really trying to open the platform to a wider pool of marketers which just leads to more Consistent spending, I think that's definitely benefited the company. So I give that about 25% from splitting my 50 in half and then the other 25%, which is something that I think is also interesting about. The next company that we'll talk about is Snap is just really trying to lean into its own unique, distinctive qualities as an ad platform. I think with things like AR marketing and sponsored lenses, things like that, a lot of new ad formats, like Minda said, I think that something that these sort of second tier of social platforms have really learned is that it's really hard for them to go toe to toe with Meta. And if they can offer something that is really distinct, they can benefit from that and carve out a unique and consistent place in marketers budgets. The threat to that I suppose is that there's nothing stopping Meta with its, you know, enormous amount of money from copying any feature that, you know, really takes off and starts to grow rapidly. Although they have already committed to spending a ton of money on AI, so maybe their ability to copy and be flexible like that is a little more limited.
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Marcus
We talk about them in the same breath, but I mean, Snap according to our number. Sorry, yeah, Snap according to our Numbers is like 20 plus times smaller than Meta. Snap actually is the 12th largest digital ad player in a list of ones that we track. LinkedIn makes twice as much money in ad dollars than Snap. So we, we talk about them a lot and they make their headlines a lot. You know, they're very innovative company, they're a social player. So that's why we talk about them alongside folks like Meta. But they are, they're in a different grouping almost. And so they have to, they have to behave that way. You know, they have to try to do all they can to get some attention and to make sure they're still part of advertisers budgets. The three things that jumped out to me quickly with Snap from digging around in their financials. So North America average revenue per user was very strong. That was up 10% year on year in Q4. So that was huge. The second thing, which is probably. I've buried the lead here because the second thing is huge. International users are the story for Snap and they've been so for two and a half years now. Because if you look at the user side, Snap hit the ceiling for North America users back in the summer of 2022, if we can remember that far back. Since then they've added no more North American users, but at the same time they've added 100 million rest of World users. So folks outside of North America and Europe, on the revenue side, that's translated to 25 to 30% international revenue growth each of the past three years. Now, accounting international revenue accounts for 20% of their total. It was up from 14 a couple of years ago. So that's a huge part of the story. And then thirdly, Snap has made the first quarterly profit in Q4 in three years, which is huge.
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Danny Konstantinovich
Yeah, the other 50% of my pie was split between Snapchat plus and international users, which are definitely linked. I mean, a ton of the Snapchat plus subscriptions are coming from markets like India. And I mean, I have been very surprised to see that this has grown so consistently quarter after quarter. You know, messaging apps like this are notoriously difficult to monetize. I mean, which you can see in Snap's own previous struggles in, like, 2022, I believe, to your point. Remember Meta and Snap and so many social platforms were reeling from the Apple tracking changes that really reduced their limit target ads and forced these companies to, you know, rethink their advertising businesses or diversify their revenues. And Snapchat plus came out of that. And, you know, I certainly remember at the time thinking, like, is anyone really going to subscribe to a, you know, a paid version of Snapchat? Like, what benefits could they add to that to really drive subscriptions? But it appears to be working for them, and I'm sure it's something that they're going to cling on to very tightly as long as it grows.
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Marcus
Yeah. So that's Snap, as I mentioned, the 12th largest. So a lot of other folks making more in our dollars than them. One of them is Pinterest. Pinterest is a company we should probably be talking about more. I'm curious to know what you think of that statement, because they've been making more Pinterest more in ad dollars than Snap for the last seven years, according to our figures, which I was shocked to learn when I went back and looked in summary, in terms of how they've been doing more more recently, full year 2024, Pinterest were up nearly 20%. Global monthly users were up over 10%. So, Mindy. Yeah. What do you make of just the conversation around Pinterest and how we kind of speak about them versus Snap, and then also, what jumps out to you about Pinterest and their most recent performance?
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Minda Smiley
Yeah, I know, it's funny. I think you're right. I mean, I feel like Snap does a good job at maybe making a lot more noise than some of these other seconds platforms because, yeah, they actually are pretty small when compared to some of these other platforms. But I think just because of, you know, historically within the social landscape, they pioneered a lot of things and they've just, you know, kind of been able to keep that reputation. But yeah, they are quite small comparatively. In terms of Pinterest though. Yeah, Pinterest is super interesting, I think. Not to sound like a broken record, but I think they're benefiting from a lot of the same things that the other ones are benefiting from, namely lower funnel, you know, focusing on those lower funnel goals that are really appealing to advertisers, of course, and then the fact that they kind of, you know, they have a unique position within the social commerce landscape because they're kind of seen as a place where people go for inspiration for products, you know, product recommendations and whatnot. So yeah, they certainly have kind of their own little lane there. And then I also think one thing that's interesting about Pinterest, they're kind of leaning into this idea of them. I don't know if social listening platform is the best way to describe it, but like, I think they really have put a lot of resources into positioning themselves as these culture forecasters. Almost every year they do this big push around, like here are the trends we think are going to be big next year based on our searches. And it's always really fun stuff. Like cherry red is going to be a huge color and like pickles are going to be on cupcakes. Like it's always like silly kind of fun stuff. But I think that is really valuable for a lot of marketers and I think that is a place, you know, Pinterest does have a lot of data that can help kind of forecast some of those trends. So I know that's a little bit abstract in terms of how it ties to their ad revenue, but I do think it plays a part.
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Marcus
No, absolutely. I mean, Danny, our colleague Jeremy Goldman, who's with you on the briefings, he was saying Pinterest is evolving into a product discovery engine, giving brands a more intent driven alternative to social media app platforms. So I think this kind of ties into what mind is saying. It's not social media in the traditional sense and advertisers starting to really pay attention to that.
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Danny Konstantinovich
Yeah. And I think, you know, mind is definitely right that they have carved out a unique niche in social commerce. And as social commerce continues to grow in the US thanks to, in large part, you know, efforts at like TikTok shop, Pinterest will definitely benefit from a runoff of that, I think. And like I said with Snap, this is a company that's definitely leaning into its unique qualities as like a product discovery platform to drive growth, and it's really focusing on that. I think something that is kind of interesting and that it warned about in its earnings call is that they still appear to be fairly reliant on Google search traffic, which is definitely something you can say of some other platforms like Reddit. But they said that, you know, the changes that Google is making to search with generative AI and, you know, whatever else could pose a threat to its business. So I think the fact that they called that out maybe is a sign, I mean, correct me if I'm wrong or if you think differently, but maybe is a sign that they're struggling to generate consistent organic traffic, that a lot of people are coming to the platform from an outside source first and not just going to Pinterest naturally when they're looking to start a shopping journey.
- [23:24]
Marcus
Yeah, yeah. It's an interesting point. Really interesting point. That's where we have to the conversation, unfortunately, gang. But thank you so much for your time and talking about some of the social folks with me. Thank you. First to Minda.
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Minda Smiley
Thank you.
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Marcus
Now thank you to Danny.
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Danny Konstantinovich
Yeah, thank you.
- [23:37]
Marcus
Yes, sir. Thank you to the whole editing crew, Victoria, John, Lance and Danny Stewart, who runs the team, and Sophie does our social media. Thanks to everyone for listening in to behind the Numbers and Emarketer video podcasts made possible by Zeta Global. Tune in Wednesday for the February edition of the Retailer Rankings episode with your host, Sarah Lieberman.