Social advertising growth slows down, notes WARC report

03 Jul,2019

By A Correspondent

 

Marketing services research firm WARC has found that advertising revenues among key social and messaging companies rose 26.2 per cent year-on-year during the first three months of 2019 to reach $17.9bn – the second-highest total on record.

 

However, while this growth outpaced all other advertising sectors, it was roughly half the rate of expansion seen just one year earlier (51.6 per cent in Q1 2018). All six companies studied in the report – Facebook, Pinterest, Snap, Twitter, Tencent (WeChat/QQ), Weibo – recorded an easing in ad revenue growth during Q1 2019.

 

In North America, the largest market for social advertising ($8.0bn in Q1 2019), user growth has stalled over the last 12 months. Time using social platforms has also stagnated in the region, remaining at two hours per day for the last three years. Facebook has 186m daily users in North America, Snap 80m, and Twitter 28m – numbers that are mostly flat or down from the previous year.

 

Further, European user growth across Facebook’s social properties (including WhatsApp and Instagram) slowed to its lowest rate on record (1.4 per cent), while Snap’s users in the region fell for the first time. Daily social media usage fell by four minutes to 1:49 (hours:minutes) across Europe year-on-year, according to GlobalWebIndex.

 

Instead, growth is emanating from Asia, in particular from India, Indonesia and the Philippines. Daily social time is also ticking up in the region, reaching 2:11 compared to 2:09 a year earlier. But users here monetise at a far lower rate than their Western counterparts.

 

The slowdown in social ad growth comes at the same time as the tech sector in general, and Facebook in particular, is under pressure over its use of consumer data. Recent research by YouGov, Dentsu and Universal McCann, among others, finds that half of consumers believe tech and social media companies have too much power and influence, while a similar proportion feel more industry regulation is required.

 

As advertising revenue growth cools, social media companies are increasingly looking to diversify. Facebook has already announced its intention to launch a new cryptocurrency, ‘Libra’, by 2020, with emerging markets being its prime focus, alongside ‘Calibra’, a digital wallet which will be integrated into Messenger and WhatsApp.

 

While social shopping is still nascent on Western platforms, in China, the ease of mobile payment has made social shopping a norm. Tencent made RMB21.8bn ($3.2bn) from FinTech in the first three months of this year. But in the US, security and privacy are cited as major concerns for the development of social commerce, and this is a core challenge Facebook will need to confront.

 

Summing up, James McDonald, Managing Editor, WARC Data, and author of the research, said: “The social sector is still expanding at a rapid pace – amassing $17.9bn of ad money in the first three months of this year alone – but growth has eased over recent quarters and has halved from a year ago. Further, user growth has stalled in North America and consumer trust in social platforms is waning.

 

“Facebook is looking to diversify its revenue streams with the launch of Libra which, the company says, will not be used directly to enrich the consumer data it has harvested for ad selling purposes. However, the cost of advertising on Facebook’s social platforms could feasibly rise if the company proves a relationship between the ads it serves and an increase in Libra-facilitated sales.”

 

 

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