Battle for ad revenue drives cut-throat rivalry in Social media market
By Ibidunni Banjoko
Social media advertising makes the second biggest market in digital ads after search advertising with an approximation of 230 billion U.S. dollars in ad revenue in the year 2022 according to Statista, a research agency in Germany.
But what makes social media different from the other pillars, like search engines and email, is that it has so many platforms within it; and not in the Bing vs Google kind of way. Each platform has massive audiences that are ripe for advertising.
The top 1,000 advertisers in the US increased their spending on the viral video platform by 66 percent to $467 million from September to October of 2022, according to data from Pathmatics, a market intelligence company.
The most popular social media platforms for advertising are, unsurprisingly, the same as those for organic marketing. These include Facebook, YouTube, Instagram, LinkedIn, TikTok, Twitter, Pinterest, Snapchat, Quora, and Reddit.
Google controls 28.6 percent of global digital ad spending, while Meta (Facebook) is not far behind at 23.7 percent.
Meanwhile, the video app got a larger share of the digital ads market as it witnessed a soar in its advertising revenue in recent times.
TikTok quickly emerged as a place to engage new, younger consumers, causing rivals to launch their own short-form video offerings such as Instagram’s Reels and YouTube’s Shorts.
TikTok offers cheaper ads in a race against social media rivals Meta, YouTube, and Twitter (report) TikTok is offering digital ads at a lower cost than rivals as it attempts to lure more advertisers and brands away from Meta, YouTube, and Twitter amid the slowdown in global ad spending.
According to the Financial Times report on Tuesday, January 10, 2023, platforms such as Twitter and Meta’s Facebook and Instagram are seeing reduced ad spending as brands pick TikTok due to lower costs and better levels of engagement.
TikTok generates most of its revenue from advertising and in 2021; the company reportedly raked in nearly USD $4 billion in revenue.
The ByteDance-owned app is predicted to have ended 2022 with 1.8 billion monthly active users from 1.2 billion at the end of 2021. In China alone, its home market, TikTok, has over 600 million daily users.
But with the slowdown in global ad spending, TikTok slashed its global revenue target for 2022 by 20%, or by at least $2 billion, to between $12 billion and $14.5 billion the Financial Times reported in November.
YouTube is also no exception to the downturn as its ad revenue slipped 1.9 percent in the third quarter to $7.07 billion, contributing to the overall 27 percent drop in Alphabet’s revenue in Q3 2022. To weather the slowdown, TikTok has reportedly enhanced its ad offerings for brands.
New York-based media agency VaynerMedia noted that obtaining 1,000 impressions from video advertising on TikTok costs nearly half that of Instagram Reels, a third cheaper than Twitter, and 62 percent less than advertising on Snapchat, the Financial Times most recently reported.
As a result, the top 1,000 advertisers in the US alone boosted their spending on TikTok by 66percent to $467 million from September to October 2022, the newspaper added, citing data from market intelligence firm Pathmatics.
Market research firm Insider Intelligence recently noted that Meta and Alphabet are losing dominance over digital ads in the US from rivals TikTok, Amazon, Microsoft, and Apple.
The firm also predicted that TikTok will soon beat YouTube in viewing time, although it does not expect TikTok to surpass Netflix’s viewing time anytime soon.
TikTok’s social buyer penetration is also climbing rapidly in the US, outpacing Pinterest. According to Insider Intelligence, by the end of 2023, it is expected to beat Instagram and tie with Facebook.
Kris Boger, general manager of global business solutions at TikTok, was quoted by the Financial Times as saying: “There is a big opportunity for brands to create incredible advertising on TikTok, whatever the budget.”
In the year 2021, YouTube introduced a shorts-form video offering to compete with Instagram Reels and TikTok videos but recently, youtube also announced the introduction of advertising capabilities for this short. The move which sees YouTube looking to stay relevant in the competitive short-form landscape and arrives as the platform’s declining ad revenue continues to pose a challenge for Google and parent company Alphabet.
Other platforms are similarly looking to build out short-form offerings to better compete against TikTok, which continues to gain a share of video ad budgets while remaining a favorite among younger audiences. Among major players, Meta in the first quarter boosted monetization efficiency for its TikTok lookalike Reels by using AI, noting that people now re-share Reels posts more than 2 billion times daily. On a similar note, Snap’s short-video format Spotlight reached over 350 million average monthly active users in Q1, a 46 percent year on year jump.
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