See how to produce winning ad creative for streaming apps:
Compare top creative trends from content streaming apps
Discover user motivations for content streaming apps
Use our Ad Concept Model to stay ahead of creative fatigue
Increase ad-buying success rate across Facebook, Google, and TikTok with our Media Buying Model
Mobile Streaming Apps
Streaming apps and mobile content services range from hard-to-find content to broad appeal favorites, pay-per-view to subscription. While different mobile content services may focus on specific user interests, there are universal user motivations for content and streaming services that drive their fast-growing popularity across all categories.
Using our Ad Concept Model, we’ve analyzed creative trends and user motivations for streaming apps and mobile content services. Our model is designed to systematize creative development and UA targeting based on iterative testing. We identify creative trends and motivations within a mobile game genre or app category then create concepts for target personas where they intersect.
This process ensures we always have new creative concepts to stay ahead of creative fatigue. We’ve systematized the process, so we know what works, why it works, and how to do more of it. From niche to mainstream, our creative concepting model means our clients get reliable top-performing creative in the most cost-efficient and scalable way.
Creative Trends for Streaming Apps
AdRules, our proprietary SaaS platform, analyzes 3.5 million videos and is updated daily. Competitive research reveals which creative trends are working best across social platforms. To identify creative trends, use Facebook Ad Library to see every ad currently running on their ad network. You can also use Mobile Action, SensorTower, or AppAnnie competitor libraries.
Top competitors in this space include Netflix, Hulu, Philo, Pluto TV, Sling, Starz, SyFy, Vudu, Shudder, FXNow, AT&T TV, BET Now, Paramount Network, Crackle, Disney+, Maimovie, TikTok, Uplive: Live it Up, Replika: My AI Friend, Roku, Youtube TV, and HBO Now.
Broad concepts and trends we see for streaming apps include:
Movie Trailers: Videos with movie trailer style content, featuring one or multiple titles. (Starz, Shudder, BET Now)
Promoting Exclusive Content: Videos or images promoting exclusive or original content. (Netflix, HBO Now, TikTok)
Special Offers: Videos or images with special offers. (Hulu, Starz)
Range of Programming: Videos or images touting breadth of content. (Philo, Pluto TV, Vudu)
App Overview: Videos or images focused on the workings of the app, including exclusive services. (Vudu, Maimovie, Replika)
User Motivations for Streaming Apps
Below, we’ve outlined high-level motivational triggers for a streaming app user.
Creative Trends x User Motivations for Streaming Apps
We map identified creative trends to user motivations within the category to develop and iterate on different concepts. In the model below, each box represents a different ad creative concept and we’ve included a sample set. Our ad concept matrix supports over 50 creative concepts for streaming apps by pairing nine trends with six user motivations.
The proposed ad concept model acts as a foundation for an iterative creative process that can be customized and extended to develop endless ad concepts for an app, website, or service. By building a scalable infrastructure for creative ideation, we provide unique lanes for creative teams and media buyers to explore ideas. The model also acts as an archive of knowledge to ensure we are always optimizing what we’ve learned.
Even if you adapt to the volatile ad ecosystem, it can still be hard to beat your control video. But a constant stream of fresh creative concepts and smart, iterative testing means we can beat the algorithmic odds. Consumer Acquisition’s industry expertise comes from managing over $3 billion in creative and paid social spend for the world’s largest mobile apps and performance advertisers. Our process is designed to save time and money by killing losing creatives quickly to significantly reduce non-converting spend. Our proprietary technology enables our entire global team to make creative and media buying decisions. These decisions are based on a client’s financial performance, helping them achieve and sustain profitable mobile app user acquisition.
Media Buying Model
As a complementary tool to our Ad Concept Model, our Media Buying Model uses a similar matrixed approach to systematize best practices for user acquisition campaign development. Any mobile app can leverage a unique combination of distinct UA strategies and campaign parameters to develop a robust testing harness for ongoing mobile campaigns across social platforms.
In its most generic state, our Media Buying Model looks like the matrix below, prior to building out a mobile app user acquisition strategy. The entire matrix is tailored to a respective ad network and operating system requirements and constraints. Geographies, languages, and bid types are all modified based on the client’s needs. Each campaign is structured to meet specific goals at the intersection of strategies and parameters.
Testing on Android
Even prior to IDFA loss, Consumer Acquisition conducted creative and UA testing on Android because it was less expensive, and results translated well to iOS. We saved iOS testing for the rare clients without an Android app or those who were solely targeting iOS users.
Android Capabilities
Unlimited ad accounts and campaigns
Unobstructed deterministic tracking
Comprehensive A/B testing with full reporting
Distributed scale and spend across campaigns
Rapid testing, unlimited test campaigns
Success drivers easy to identify and scale
Google Firebase enables tROAS, delivering ~15% lift on CPA campaigns with better user mapping
iOS IDFA Impacts
Many accounts but only 9 campaigns, 5 ad sets
SKAN tracking disabled after 24-48 hours (See AppsFlyer Conversion Studio below)
A/B testing in DCO blobs, no asset reporting
Fewer campaigns, higher budgets, more significant edits
Restricted testing, only 9 campaigns
Aggregate insights drive slower optimization
Post-IDFA, iOS lookalike audiences have lost -65% of their reach and effectiveness
Below are media buying models for Facebook Android versus Facebook iOS SKAN to show different tactics, limitations, and benefits. For Google iOS SKAN, and TikTok iOS and Android, as well as in-depth tactics by channel, see our full Media Buying Model here.
Today’s post brings you expert guidance to efficiently structure your media buying and creative concepting in December 2021. Plus, how to get the most from UA during the holiday season.
We have analyzed top-performing ad creative for mobile subscription apps, streaming apps, and fintech apps to show how user motivations can improve your top-of-funnel UA. In addition, we have gone deep on the positive and negative impact of IDFA during Q3 with insights from eCommerce apps, FinTech, DTC, subscription services, dating apps, and mobile games.
Structure your media buying with proven best practices using our Media Buying Model. Any mobile app can leverage a combination of distinct UA strategies and campaign parameters to develop a robust testing harness for ongoing mobile campaigns across social platforms.
It is possible to beat Facebook’s creative fatigue and consistently find new winning ads. Consumer Acquisition’s Ad Concept Model is designed to systematize creative development and UA targeting based on iterative testing. Systematize creative concepting and leverage user motivations to customize ad creative in a simple, repeatable framework.
Get Q3 insights on IDFA impact from Match, Peloton, Zynga, Unity, Snap, Facebook, Twitter, Google, Pinterest, Applovin, Playtika, TakeTwo Interactive, EA, WPP, IronSource, Rovio, Square Enix, Roblox, and many more. Depending on the reach of their audience and the monetization event (subscription, purchase, free trial), the impact of IDFA loss has helped or hurt businesses differently.
Expect to see CPM increases of 30-40% between Black Friday and Christmas across social channels. Non-eCommerce advertisers should consider reducing spend from Thanksgiving until December 26, 2021, and then accelerate into January to take advantage of CPM drops. Bulk up on creative production and testing to have enough high-performing assets for late December spend increases.
Streaming apps and mobile content services deliver exclusive, niche, and popular content to millions of viewers each day through subscriptions and pay-per-view. Get an analysis of creative trends and user motivations for these fast-growing services.
From investment advice to cryptocurrency to budget planning, fintech apps put money management right in your pocket. We’ve analyzed the best-performing fintech ads based on Facebook Ad Library data to see why they are working. Plus, we go deep on how Acorns is tapping into unique user motivations in the fintech space.
The subscription economy is on pace to reach $1.5 trillion by 2025 according to financial services firm UBS. Using our Ad Concept Model, we’ve analyzed creative trends and user motivations for mobile app subscription services to demonstrate how we stay ahead of creative fatigue while providing our clients reliable top-performing creative in the most cost-efficient and scalable way.
“In our third consecutive year of being recognized as a leading Bay Area company in growth, we are again truly honored to be included by the San Francisco Business Times. This recognition is entirely a credit to the people of our organization. They continue to drive growth and innovation at Consumer Acquisition year after year.” — Brian Bowman, CEO
Media Buying Model
Structure your media buying with proven best practices using Consumer Acquisition’s Media Buying Model. Any mobile app can leverage a combination of distinct UA strategies and campaign parameters to develop a robust testing harness for ongoing mobile campaigns across social platforms.
See media buying best practices for Facebook Android, Facebook iOS SKAN, Google, and TikTok
Increase ad-buying success rate across social platforms leveraging our account structure and media model
Develop and systematize a process to test account configuration and media buying tactics
Increase communication of media buying strategies to stakeholders
Our Media Buying Model is tailored to a respective ad network and operating system requirements and constraints. Geographies, languages, and bid types are all modified based on the client’s needs. Each campaign is structured to meet specific goals at the intersection of strategies and parameters.
Based on over 100,000 videos and images we produce and test yearly for our clients, our research has shown that winning ads last only 10 weeks, before they burn out. We have performed over 25,000 A/B and multivariate tests on Facebook, Google, TikTok, and Snap and have learned that 85-95% of new creative concepts fail to outperform your best ad. To survive in this volatile ad ecosystem, you’ll need 20-50 new concepts to find your next winning creative. And you’ll need to keep developing new concepts to stay ahead of creative fatigue.
Tying persona-led ad creative to user motivation is what Facebook calls a “future-proof solution” for UA and creative teams. Our Ad Concept Model is designed to systematize creative development and UA targeting based on iterative testing. These are the steps within the model:
Identify creative trends within a category
Identify motivations within a category
Map creative trends to motivations within a category
Create concepts for personas at the intersection of each trend and motivation
Repeat step 4 for all additional personas
Why use a model like this?
Consumer Acquisition’s Ad Concept Model ensures we always have new creative concepts to stay ahead of creative fatigue. We’ve systematized the process, so we know what works, why it works, and how to do more of it. From niche to mainstream, our creative concepting model means our clients get reliable top-performing creative in the most cost-efficient and scalable way.
Q3 Earnings Roundup & IDFA Report
Check out our Q3 Earnings Roundup & IDFA Impact Report with insights from Match, Peloton, Zynga, Unity, Snap, Facebook, Twitter, Google, Pinterest, Applovin, Playtika, TakeTwo Interactive, EA, WPP, IronSource, Rovio, Square Enix, Roblox, and many more.
Nike Inc on Thursday revealed a virtual world modeled after its headquarters on video game platform Roblox Corp, becoming one of the first big brands to enter the “metaverse”.
Facebook will no longer let advertisers target people with ads based on how interested the social network thinks they are in topics like politics, religion, or race.
Facebook aka Meta recently said it would add a way for creators to accept payments directly through the platform. The move is a direct stab at Apple which usually takes a 30% cut.
Epic v. Apple judge Yvonne Gonzalez Rogers says Apple must comply with an order to let developers add links and buttons to external payment options, denying the company’s motion for a stay.
Social media company Snap this week was slapped with a class-action lawsuit claiming executives misrepresented the threat Apple privacy changes posed to the company’s revenue stream.
While legislators and regulators around the world weigh big changes to Apple’s and Google’s app stores, some quick revisions could be coming within weeks, thanks to a U.S. judge’s decision and Korean law.
Apple is secretly buying Google ads for high-value apps to collect potentially millions of dollars in subscription revenue, multiple app publishers have reported.
In the fourth quarter, Apple delivered in-line earnings. Antitrust has become a significant risk factor for the company, with Epic Games having won a partial victory on in-app sales.
TechCrunch spoke with Zynga CEO Frank Gibeau on how the mobile game giant has been able to navigate the advertising crisis while making moves to expand cross-platform and onto the blockchain.
During the “The Apple Ecosystem Challenges” panel, presented by Xsolla at GamesBeat Summit Next, panelists discussed how the changes to the Apple app store ecosystem offer challenges, but also a potential opportunity, from the IDFA deprecation to Apple’s various legal battles.
Brian Bowman, CEO of ConsumerAcquisition.com, has completed an assessment on several, quarter three (Q3) earnings report calls and what they indicate regarding the impact of Apple’s IDFA removal on businesses.
Executive Summary: From eCommerce apps to FinTech, DTC, subscription services, dating apps, and mobile games, IDFA loss has impacted targeting and measurement, making user acquisition less effective and less profitable on iOS. Q3 earnings calls will provide you with a clearer picture of the IDFA impact across the industry.
Facebook COO, Sheryl Sandberg: Recovery from IDFA loss is a “multi-year effort” and “will take time and will be a focus for us throughout 2022 and beyond”
Match COO & CFO, Gary Swidler: “the market environment has become more competitive and also more challenging as a result of changes that Apple has made around IDFA.”
Peloton CFO, Jill Woodworth: “there have been some significant changes made by Apple that is leading to some targeting headwinds. Like many other direct-to-consumer marketers, we’re seeing some disruptive impact as our teams adjust to the new data landscape.”
Playtika CFO, Craig Abrahams: “We were able to manage the decline in iOS installs by moving resources from social networks to other digital advertising networks and also investing in offline activity, which has increased organic installs. We also shifted budgets towards Android.”
ironSource CEO, Tomer Bar Zeev: “it becomes clearer and clearer today that some companies are net beneficiaries of the changes, some are a bit less… we so far, thus far we’ve seen IDFA being a net positive.” They are watchful for potential short-term negative effects of IDFA, though they have not seen any over the last three quarters and consider IDFA “behind us.”
WSJ interviewed a dozen eCommerce companies and reported they now have to spend a lot more money on ads to get the same number of sales prior to IDFA loss. Without enough data to know how effective ads were at driving purchases, many eCommerce companies reduced their ad spending.
WPP lifted sales forecast for the third time this year, based on strong advertiser demand in Q3. No negative impact from IDFA, that’s “not part of the business in which we really operate” said Mark Read, CEO.
Applovin CEO, Adam Foroughi: “Our identity and our data sets and models are built on our first-party data. And so, we ended up in a very advantaged position”. They forecast their “unified platform should surpass $15 billion in advertiser spend across all industry bidders entering 2023”.
Unity CEO, John Riccitiello: Benefitting from their own data set of 3 billion people, hundreds of millions on their IAP platform and their predictive AI models, Unity “gained an advantage to all those who use identity” and “it played out to a script almost exactly as we’d hoped.” Unity is “becoming the de facto infrastructure layer of gaming” while expanding into construction, film, automotive, aerospace, and education.
Zynga CFO, Ger Griffin: “we did see toward the end of Q3… across the board improvement in the UA landscape… we’re actually investing in user acquisition across multiple channels.
Q3 IDFA Impact: Public Earnings Roundup
From Q2 to Q3
For many public ad networks and mobile app companies, the discussion of IDFA’s impact in Q2 was essentially “wait and see.” However, Q3 earnings calls provide a clearer picture of how the impact is being felt across the industry. Companies reported minimal Q2 IDFA impact and continued to focus on the pandemic as the main driver of industry fluctuations. Notably, Zynga’s Q2 earnings call directly addressed Apple’s privacy changes, estimating H2 bookings could be down by $100 million. IDFA loss resulted in a higher cost to acquire new players and to compensate, Zynga pulled back iOS UA spend.
Similarly, The Wall Street Journal reported that in a July poll of 118 eCommerce store owners by eCommerceFuel, 62% had decreased their Facebook ad spending since the loss of IDFA. As the impact of IDFA loss took a stronger hold in Q3, many advertisers reduced iOS spend, diversified their acquisition portfolios towards DSPs and SDK networks, and focused on Android for creative testing and ROAS drivers. And even as advertisers pulled back from iOS, Apple’s high-margin advertising business remained strong and is estimated to reach $20 billion in revenue by 2025. Advertising constitutes 17% of Apple’s services revenue and 5% of total revenue.
Q3 Earnings Reports
To add to our ongoing IDFA impact updates, we reviewed respective Q3 earnings calls from the following companies. They include Match, Peloton, Zynga, Unity, Snap, Facebook, Twitter, Google, Pinterest, Applovin, Playtika, TakeTwo Interactive, EA, WPP, ironSource, Rovio, Square Enix, Roblox, and many more. Even as companies reported pandemic-related supply chain disruptions and labor shortages, economic recovery appears underway. US Household wealth reached a record high just as we entered Q3, and CEOs of the world’s biggest companies are expressing pre-pandemic levels of confidence in the global economy. October 2021 also welcomed 531,000 new US jobs in an 80% recovery from the deep recession of 2020, along with the lowest unemployment rate (4.6%) in the pandemic era.
Using Q3 earnings reports across major mobile app companies and ad networks, we’ve summarized our assessment of IDFA on the mobile advertising ecosystem based on direct quotes from these companies. Read on for our analysis and get additional excerpts from the transcripts at the end of this article.
Google reported its highest sales growth in more than a decade. At the same time, other social ad networks with higher levels of direct response advertising exposure felt a greater negative impact of IDFA loss, along with supply chain disruption, labor shortages, and the great resignation.
Facebook
Facebook suggested global supply chain issues left many consumer businesses with less inventory. Consequently, reducing their appetite to generate demand from consumers, which has impacted advertising spend. Apple said supply chain issues reduced revenue by $6b in Q3. In contrast, WPP, one of the world’s largest advertising groups, lifted their sales forecast for the third time this year based on strong advertiser demand.
Unity, ironSource, and Applovin
Unity, ironSource, and Applovin stated they are benefiting from IDFA loss, as revenue flowed into their platforms to take advantage of their first-party data and contextual advertising capabilities. Neil Vogel of IAC said, “What we always knew is that context and content would work, and that’s what’s worked in media for the last 100 years, right? Like Enthusiast Magazine has always done great, still does great. Like a food magazine still does great if you know what it is. So, we don’t need to track people to know what they want.”
Playtika
Playtika CFO Craig Abrahams credited AI and the diversification of UA sources and data analytics for the ability to adapt to IDFA loss. “We were able to manage the decline in iOS installs by moving resources from social networks to other digital advertising networks and investing in offline activity, which has increased organic installs. We also shifted budgets towards Android.” And even more positively, ironSource CEO Tomer Bar Zeev said, “it becomes clearer and clearer today that some companies are net beneficiaries of the changes, some are a bit less. And again, as I previously said, we so far, thus far we’ve seen IDFA being a net positive.”
New Strategies
Based on public comments, IDFA impact is generally being accepted as the new normal, with lower-level setting and margin compression due to the complexity of targeting and measurement. Businesses are acclimating and many are growing within these new constraints. Successful strategies we are seeing emerge include:
Companies expanding their acquisition portfolios through SDK Networks and DSPs
Rebuilding iOS onboarding flows to indicate monetization intent within the first 24 hours post-install
Reworking LTV models to account for higher leakage into organic due to IDFA and SKAN limitations
Media mix modeling
Incrementality testing
Native attribution tracking and analysis
First-party data and developing new “native experiences”
Social platform-based experiences such as games on Snap and TikTok
Enhancing cross-platform capabilities from console to mobile
Increasing direct-to-consumer billing capabilities while waiting on Epic v. Apple stays and appeals
Cross-industry partnerships and collaborative groups working on solutions
Outside of IDFA, we also see companies discussing the opportunities around NFTs, blockchain, G5, cross-platform, alternative payments, Web 3.0, user-generated content, and the metaverse. We’ll analyze future-looking trends further in our 2022 Industry Forecast coming in December.
Match and Peloton
From eCommerce apps to FinTech, DTC, subscription services, dating apps, and mobile games, IDFA loss has impacted targeting and measurement, making user acquisition less effective and less profitable on iOS. Gary Swidler, Match COO & CFO said in their Q3 earnings call, “the market environment has become more competitive and also more challenging as a result of changes that Apple has made around IDFA.” Jill Woodworth, Peloton CFO said, “there have been some significant changes made by Apple that are leading to some targeting headwinds. Like many other direct-to-consumer marketers, we’re seeing some disruptive impact as our teams adjust to the new data landscape.”
A dozen eCommerce companies interviewed by WSJ reported they now have to spend a lot more money on ads to get the same number of sales prior to IDFA loss. Without enough data to know how effective ads were at driving purchases, many eCommerce companies reduced their ad spending. Of particular concern was Snap reporting their SKAN measurement results diverged “meaningfully from the results we observed on other first and third-party measurement solutions, making SKAN unreliable as a standalone measurement solution.”
Apple
In Apple’s Q3 2021 earnings call, Tim Cook was asked about feedback he’s “seen or received from [Apple] advertisers and users and how it has also impacted search ads, your own ad business.” This was Cook’s response:
The feedback from customers is overwhelmingly positive. Customers appreciate having the option of whether they want to be tracked or not. And so, there’s an outpouring of customer satisfaction there on the customer side. And the reason that we did this is that — as you know, if you followed us for a while, we believe strongly that privacy is a basic human right and we believe that for decades, not just in the last year or so.
We’ve historically rolled out more and more features over time for — to place the decision of whether to share data and what data to share in the hands of the user where we believe that it belongs. We don’t think that’s Apple’s role to decide, and we don’t think that’s another company’s role to decide but rather the individual who owns the data itself. And so, that’s our motivation there. There’s no other motivation.
Cook was asked about advertiser feedback and responded with his description of “customers” aligning with Apple users as if advertisers are not also Apple customers. The omission of advertiser feedback is unfortunately consistent with their anti-industry and anti-developer practices, such as changing the entire iOS mobile app reporting and measurement system without any industry participation.
In a callout to the larger ecosystem consequences of Apple’s regulations during Facebook’s earnings call, Mark Zuckerberg directly addressed how Apple’s IDFA changes “are not only negatively affecting our business but millions of small businesses in what is already a difficult time for them and the economy.” Ultimately, Apple is making difficult marketplace dynamics even more difficult and less profitable, just as consumers are getting ready for holiday shopping. Additionally, SMBs are more likely to have limited marketing resources for a multi-platform user acquisition strategy.
Q3 and Q4
Q3 is the first full quarter companies have had to understand and adjust to the removal of IDFA and the full impact will roll into 2022. Facebook reported Q3 ad impressions were up 9% and CPMs were up 22%, while Twitter opened 30% more ad inventory for iOS users. We’re seeing iOS revenue loss of -15% to -35% across mobile app advertisers, CPMs are up, ad impressions are up, and impression quality is likely down due to less effective audience targeting and measurement.
We expect a bumpy Q4 for all mobile app advertisers, with ad spend that is less efficient. Recovery from mobile ad ecosystem changes will be what many companies called “a multi-year effort.” But while challenges persist, we are also excited to see how companies are improving and innovating in real-time to address those challenges. Because the impacts are nuanced based on the target audience and business model, below are summaries highlighting different strengths, challenges, and opportunities from public companies which shared Q3 earnings.
Facebook had an amazing quarter with revenue of $29 billion, up 35% year over year
Mark Zuckerberg directly addressed the negative impact of “Apple’s changes” on small businesses
Sheryl Sandberg on headwinds said, “The biggest is the impact of Apple iOS 14 changes, which has created headwinds for others in the industry as well, major challenges for small businesses, and advantaged Apple’s own advertising business”
Recovery from IDFA loss is a “multi-year effort” and “will take time and will be a focus for us throughout 2022 and beyond”
Facebook suggested global supply chain issues left consumer businesses with less inventory reducing their appetite to generate demand from consumers, which has impacted advertising spends
Considering changes, Facebook is focusing on rebuilding their targeting and optimization systems to work with less data, which they stated would take years, not months
Unlike Apple, Facebook is working as part of several industry collaborative groups on what tools will look like and how they are adopted
Zuckerberg emphasized the value of UGC video through the Reels feature, a trend we’ll discuss in our upcoming 2022 Playbook
With the universal adoption of iOS 14+, Facebook anticipated Q4 ATT impact to be no worse than Q3, with the caveat of a first-time holiday season with new regulations
Based on the top of Facebook’s guidance range, Mobile Dev Memo estimates the absolute dollar impact of ATT across Q3 and Q4, would be $8.3BN
The revenue impact from ATT increased on a sequential basis “but remains modest”
Direct response (DR) advertising has a minimal footprint on the platform (15%) compared to brand advertising (85%), though their stated goal is to grow DR to 50/50
Given Twitter’s low direct response inventory, ATT impact will take time to see
Mitigations and adoption speed of new standards, like SKAdNetwork and resulting changes across their technical stack, have helped minimize ATT impact
SKAdNetwork opened 30% more inventory for iOS customers, however adding inventory/impressions is not sustainable long term, nor does it address the loss of signal or measurement
Twitter identified personalization and relevance as their greatest opportunity for growth
With 12,000 topics users can follow, Twitter provides a path on how contextual advertising and an interest graph may minimize the negative impact of IDFA loss
There is a signal unique to Twitter that they want to leverage more effectively than they have in the past
They are optimistic they can improve the relevance of the brand and direct response ads on Twitter
IDFA had “modest impact” on YouTube revenues, “primarily in direct response” advertising
Local retail queries are up as shoppers return to stores
Consumer trends emerge at a local level based on vaccination rates and local regulations
Advertisers are including in-store sales alongside e-commerce goals to drive omnichannel growth
Direct response and video action campaigns are driving conversions
YouTube’s reach is increasingly incremental to TV signaling the importance of a cross-platform approach with media mix models
Unlike Apple, Google’s stated focus is on “supporting developers, small and large advertisers, and creators’ publishers, so that they’re able to mitigate [IDFA/ATT] impact to their businesses”
Alphabet Inc.’s Google said it will add the option for developers to offer alternative billing systems on its Android app store in South Korea, complying with a recently passed law in the country
Did not see material revenue impact from ATT policy changes due to their removal of app install ads and their focus on branding and consumer packaged goods, as opposed to direct response advertising
Is focusing on the rich interactive video to deepen engagement over time and drive shopping
No negative impact from Apple changes as tracking is “not part of the business in which we really operate.”
Privacy changes “make you think harder about well how do we collect data and how do we build our own set of data. This is sort of a first-party data question.”
Missed the lower end of their guidance by $3 million due to “changes to advertising tracking on iOS and macroeconomic factors that have impacted our advertising partners”
Was negatively impacted due to the contribution rate of direct response advertising and the overall advertiser concentration
Reported their SKAN measurement results diverged “meaningfully from the results we observed on other first and third-party measurement solutions, making SKAN unreliable as a standalone measurement solution.”
According to CEO Spiegel: “Our advertising business was disrupted by changes to iOS ad tracking that were broadly rolled out by Apple in June and July. While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS.”
To improve advertiser ROI, they are focusing on Incrementality testing, attribution analysis, growing native experiences within the app itself, and leveraging first-party data
Snap says the IDFA issues will continue into Q4 and “several more months” into 2022
Applovin’s software platform revenue grew 385% year over year to $193 million. They’ve been accelerating for the past four quarters, mostly organically.
Their marketplace advantage comes from scaled first-party data that fuels their machine learning
On IDFA impact: “advertising quarter over quarter was mostly muted in terms of growth. So, there is a loss in terms of targeting that’s possible with IDFA going away, and publisher CPMs did diminish on iOS.”
Their mobile game audience is around 200 million monthly actives, with 3,000 game developers building content for their platform.
Applovin’s datasets and models are built on first-party data, so IDFA changes helped decrease competition as their software business grew 32% quarter over quarter. They “ended up in a very advantaged position.”
They forecast their “unified platform should surpass $15 billion in advertiser spend across all industry bidders entering 2023. This would make our exchange one of the largest advertising ecosystems in the world.”
“Our business model has advantages that are going to be hard for others to overcome, and we continue to accelerate through it. Now the market is just greenfield for us, and there’s going to be more customers that are going to come on our platform because as we unify MAX and MoPub supply, there are very few ad opportunities in the world at the scale of $15 billion a year of ad spend flowing through one single access point.”
In Q3 ironSource achieved record results with total revenues of $140 million, up 60% year-over-year
86% of the top 100 most downloaded games across both the App and Play stores used ironSource in Q3
Their platform is efficiently providing multiple solutions and visibility for every stage of the app growth lifecycle
They point to the strength of their data: most leading mobile game developers use their SDK, and they are integrated on more than 160 million active devices
They have “a very premium, very high premium, very special supply source that of course will help advertisers delegate users in a more efficient way, in the most scalable way
Acquisition of Tapjoy enables optimization of in-game and in-app economy, and additional market scale and increased SDK footprint
Acquisition of Bidalgo enables cross-channel management and optimization for every element of marketing activity throughout the ironSource platform
App developers need to be able to run and optimize marketing campaigns across multiple channels to grow at scale
When developers can generate higher revenues or increase user LTV, they spend more on user acquisition
Continue to invest in machine learning capabilities and targeting
They launched two products that support app developers in the evolving landscape on iOS: one that allows app developers to evaluate the quality of an acquired user, and another which gives them critical transparency on their user acquisition performance across all networks
They’ve “seen IDFA being a net positive” and are a “beneficiary”
Are watchful for potential short-term negative effects of IDFA, though they have not seen any over the last three quarters and consider IDFA “behind us”
Benefits from their own data set of 3 billion people, hundreds of millions on their IAP platform, and their predictive AI models
Unity’s ad network “is based on understanding contextually where [users] are and what they’re doing and what they’ve done before and what they’re going to do next using predictive models based on AI on the 50 billion-plus data events we adjust per day.”
Unity claims to “have the single largest, largest data insight based on the largest MAU count for anybody in our world.”
There are 5 million projects started on the Unity platform each month
Considering IDFA, Unity “gained an advantage to all those who use identity” and “it played out to a script almost exactly as we’d hoped”
Unity’s acquisition of IDV shows upmarket growth into AAA-title territory and filmmaking
Unity’s Parsec acquisition provides a work-from-home developer solution for creators for expanded access
The Weta acquisition increases Unity’s exclusive and sophisticated visual effects (VFX) tools
Zynga is showing signs of recovery in UA, on track to finish 2021 with Zynga’s best-ever annual top-line performance and the largest mobile audience in the company’s history
They’ve “seen across the board improvement in the UA landscape” and are very positive going into Q4, which we assume is due to pockets of efficiency uncovered from DSP and SDK networks
The hypercasual portfolio is doing well, contributing to ad business growth
New releases have advertising built-in through watch-to-earn
They are confident in their UA tools and the techniques to successfully release new games and scale them, including FarmVille 3
They are investing in direct-to-consumer billing, NFTs, and blockchain technology, Snap and TikTok games, cross-platform mobile/console
Assessing opportunities of NFTs: real estate, collecting cars, RPGs, collection mechanics, RPG mechanics, and builder mechanics
They are focusing on their owned IP-developed games to build in NFTs as part of the core gameplay loop
They believe “first-party content and data, when combined with an at-scale ad platform, can create a powerful competitive advantage.”
Zynga is taking a full platform approach, investing in their DSPs and SDK networks, while acquiring users across multiple channels.
They continue to build out their DTC capabilities on mobile to complement console capabilities
“The market environment has become more competitive and more challenging as a result of changes that Apple has made around IDFA. “
Elimination of IDFA is impacting various parts of the company, and Match is offsetting impact through “creativity and some good solves and adjusting channels and so forth”
Covid continues to be an issue in many markets
About 70% of Match revenue comes from subscriptions, with Apple fees accounting for 80% of subscription fees between Apple and Google
Bumble app had an excellent quarter with revenue of $142 million, up 39% year-over-year and representing more than 70% of total company revenue for Q3
Badoo app was $58 million for Q3, down 3% year over year as user communities continue to face economic pressures from COVID
Around 20% percent of new user acquisition came via performance marketing with the remainder coming organically through word of mouth and brand recognition.
They did not see any material degradation across the board around marketing efficiencies on performance marketing and focused on channel mix. This strategy appears to be like Zynga and Playtika.
Bumble is excited about the future of video and video chat, and how it can be interwoven into Web 3.0
They have deep expertise today in enabling non-App Store payment systems and linking to third-party payment systems
Google “has been a fantastic partner,” particularly in dropping subscription fees from 30% to 15%
Q3 Additional Insights
EA: NFTs can expand the value of the digital ecosystem Andrew Wilson, CEO
I think of that — as we think about digital collectibles, particularly our sports games, again, are different across different franchises. And so, collectability has different values over time. And collectability games like FIFA, and Maden, and NHL is really built on driving value through the traditional sports season. I think your question is, is there an opportunity, particularly as we think about NFTs and other digital ecosystems to expand that value over time. And the short answer to that is yes. And the slightly longer answer to that is, we need to work and make sure we continue to appropriately tune and balance the experience for our players.
SKILLZ: Massive revenue growth
Andrew Paradise, CEO
We’re definitely very proud that we share the news with you that we generated 70% revenue growth year-over-year led in large part by 47% year-over-year growth in paying monthly active users.
PLAYTIKA: Diversified UA sources and shifting budgets toward Android
Craig Abrahams, Chief Financial Officer, Playtika
Let me switch topics now to marketing and user acquisition. Our effective CPIs were stable in the third quarter, and game installations were strong overall. This further highlights our ability to navigate a changing landscape. We were able to manage the decline in iOS installs by moving resources from social networks to other digital advertising networks and investing in offline activity, which has increased organic installs. We also shifted budgets towards Android. As we mentioned, we believe Playtika is well-positioned to weather changes in the user acquisition environment due to our overall diversification of UA sources, abilities and data analytics, and artificial intelligence that allows us to evaluate the performance of marketing investments very quickly and direct dollars to areas that yield the best results.
IAC/INTERACTIVECORP: Context, content, and first-party data make IDFA/ATT a non-issue Neil Vogel, CEO
What we always knew is that context and content would work, and that’s what’s worked in media for the last 100 years, right? Like Enthusiast Magazine has always done great, still does great. Like a food magazine still does great if you know what it is. So, we don’t need to track people to know what they want. And one of the beauties of Meredith is they have lots of login data and lots of first-party data and lots of subscription data that we don’t have. But that’s data that people want you to have because they’re really interested in this thing, and they are, in most cases, paying for something.
So, between our ability to target via content and Meredith’s ability to target via content and first-party data and what we can learn from there, we really look at privacy as an advantage. And you’ll see a bunch of other media companies with some big headwinds because of changes Apple or whoever has made. That’s not really been a factor for us at all.
PELOTON: Notable UA challenges due to Apple changes
Jill Woodworth, Chief Financial Officer
At the end of Q1, we had over 887,000 app subscribers, representing 74% year-over-year growth, slightly ahead of our internal expectations. For the quarter, we saw modestly better retention than expected, but we’re also seeing some challenges related to acquisition efficiencies. As you likely know, there have been some significant changes made by Apple that is leading to some targeting headwinds. Like many other direct-to-consumer marketers, we’re seeing some disruptive impact as our teams adjust to the new data landscape.
INTERPUBLIC: Reporting overall recovery from multiple sectors Philippe Krakowsky, Chief Executive Officer
At our DXTRA segment, organic growth was 18.6% reflecting double-digit increases across each of our DXTRA agencies and furthering the rebound from the sharp impact of the pandemic last year on our sports and entertainment as well as experiential businesses. Looking at client sectors, the picture is also one of balanced growth with nearly every one of our major client sectors increasing at a double-digit percentage rate, led by the auto sector and other sectors with government and industrials and the tech and telecom retail and healthcare sectors.
ROVIO: Pandemic and Apple regulations fueling near-term uncertainty Quarterly Outlook for 2021
The mobile gaming market continues to grow with casual gaming being a major growth driver. The ongoing changes in consumer behavior and underlying market trends are accelerated by the COVID pandemic and plays an important role in both current games operation and new game development. This combined with industry changes like Apple’s privacy policy fuels the near-term uncertainty in the market environment.
We will focus on improving the performance of our key live games and on launching new innovative products. We continue to show diligence in our UA spend. Depending on market conditions, the performance of our investments, and the launch of new games, we aim to increase our UA investments to build growth for the coming years. This may have implications for short-term profitability.
Square Enix claims that NFTs have a “high affinity with our assets,” and is also “contemplating [its] robust entry into blockchain games,” believing the token economies are taking hold and will continue to expand, and that games are moving from centralized to decentralized formats.
EARNINGS TRANSCRIPT EXCERPTS
FACEBOOK
Mark Zuckerberg, Chief Executive Officer
As expected, we did experience revenue headwinds this quarter, including from Apple’s changes that are not only negatively affecting our business but millions of small businesses in what is already a difficult time for them and the economy.
On Reels. Yeah, I think that this is going to be a very meaningful, qualitative change in how people use a lot of different products across the internet. I mean, I think every once in a while, its format comes along that allows new types of content, right? So, we saw this with News Feed, we saw it with Stories, and I think Reels is — from everything I’ve seen, has the potential to be something of that scale where there are different flavors of it in different apps. But I think as a format, it can be very fundamental.
Sheryl Sandberg, Chief Operating Officer
We’ve been open about the fact that there were headwinds coming and we’ve experienced that in Q3. The biggest is the impact of Apple iOS 14 changes, which has created headwinds for others in the industry as well, major challenges for small businesses, and advantaged Apple’s own advertising business. We started to see that impact in Q2 but adoption on the consumer side ramped up by late June, so it hit critical mass in Q3. As a result, we’ve encountered two challenges. One is that the accuracy of our ad targeting decreased, which increased the cost of driving outcomes for our advertisers. And the other is that measuring those outcomes became more difficult. On targeting, we focused on improving campaign performance even with the increased limitations facing our industry.
We’re building commerce tools to help businesses reach more new customers and get more incremental sales. And over the longer term, we’re developing privacy-enhancing technologies in collaboration with others across the industry to help minimize the amount of personal information we process, while still allowing us to share relevant ads. Progress in these areas will take time and will be a focus for us throughout 2022 and beyond.
That doesn’t mean e-commerce has stopped growing. Businesses are still making the shift online, but e-commerce is no longer growing at the pace it was at the height of the pandemic. These factors have been compounded for many advertisers by major global supply chain issues and labor shortages, which have left many consumer businesses with less inventory. This has reduced their appetite to generate demand from consumers, which has impacted advertising spend.
Our direct-response products are built on user-level conversions. And as a result of the iOS changes, we don’t see the same level of conversion data coming through. So, we have to rebuild our targeting and optimization systems to work with fewer data. This is a multi-year effort.
So, with some of the technology, we can build ourselves. We build AI, we made continued investments in AI that help us maintain or improve long-term performance data. We’re building some of our own commerce tools and those are tools we can build that we need other people to adopt. And then some of the targeting opportunities we see offset, take, you know, tools we can build or tools we can build in industry collaboration.
We’re really working as part of several industry collaborative groups on what those tools will look like and how those get adopted. So, those, obviously, take more partnership and are less in our direct control.
Susan Li, VP of Finance
Yes, I think echoing what Dave mentioned earlier, we had a range of expected impacts from the ATT changes. Ultimately what we’ve seen is in that range but it’s really on the higher end of what we had expected. And I think the underreporting of web conversions has really been a bigger issue than we expected, but it’s something that we’re very focused on helping to mitigate through better modeling techniques.
Dave Wehner, Chief Financial Officer
First, advertising spend was negatively impacted by performance and measurement headwinds related to Apple’s ATT changes. Second, we are seeing some macro headwinds as growth in online commerce has moderated from the elevated levels experienced earlier in the pandemic and businesses faced supply chain disruptions. Third, COVID resurgences in Southeast Asia have led to additional lockdowns and curtailment of economic activity. Another revenue was $734 million, up 195 percent, driven by strong Quest 2 sales.
On the iOS question as it relates to Q4 versus Q3, you know, the bulk of iOS 14 updates were completed, you know, as we entered Q3, which contributed to the step-up and the impact from Q2 to Q3. Since iOS 14 is now widely adopted, we don’t expect a similar step-up in Q4. But, you know, importantly, we haven’t gone through a holiday season with these changes and prices are higher during the holidays given strong demand.
TWITTER
Jack Dorsey, Chief Executive Officer
Our greatest opportunity and potential for growth is around personalization and relevance. That is where we’ve consistently gotten the greatest games and everything that we do, and we intend to put a lot more emphasis here. This mainly speaks to our application of machine learning in general, AI, across every product surface that we have. But it also lends itself to some of the newer products’ surfaces and capabilities that we’ve been talking about. Some far longer, some more recently.
Topics and interests continue to be a highlight. We are close to 12,000 topics now, 11 different languages, 230 million accounts follow at least one topic. We’re putting this closer and closer to onboarding. But this helps everything. This helps our experience, consumer experience helps our business because consists of signals with a ton of intent on, I’m expressing intent around a particular issue or topic instead of us having to employ it. And it also lays the foundation for the products that we want to create.
So that all these actions can positively reinforce one another. So, everything from spaces to the newsletters to the following topics, all these things show a particular intent and a particular interest. And we have to depend less and less on inference in order to strengthen our relevance and get better signals.
Ned Segal, Chief Financial Officer
The impact of COVID remains fragmented across the world, and we believe consumer behavior has yet to normalize.
Despite some expected 2022 revenue loss, there are no changes to our goal of generating $7.5 billion or more of annual revenue in 2023, with our increased focus and additional resources working on increasing our market share. And the $150 billion and growing addressable market for ads on Twitter. I’ve also noticed there has been a lot of focus more broadly on the impact of the supply chain on the economy in general and advertising in particular. I’m pleased to share that our launching connects value proposition continues to resonate with advertisers across the economy.
Both well, more than half of our total ad revenue year-to-date, associated with services and digital goods. Let me also spend a moment on ATT. We continue to see opportunities around personalization on Twitter as we better leverage our unique signal to improve people’s experience. And show them more effective ads across both brand and direct response. The revenue impact we experienced from ATT in Q3 increased on a sequential basis but remains modest. The impact of ATT is likely to vary across ad platforms given the unique mix of ad formats, signal, and remediations on each, as well as other factors.
The mitigations we’ve put in place and the speed with which we’ve adopted new standards, like SKAdNetwork and resulting changes across our technical stack have contributed to minimizing the impact to us. Since the launch of ATT April, we’ve invested in supporting SKAdNetwork, opening up 30% plus more inventory and scale on iOS, and launched support for view-through attribution and FK campaign ID management features.
It’s still too early for Twitter to assess the long-term impact of Apple’s privacy-related iOS changes, but the Q3 revenue impact was lower than expected, and we’ve incorporated an ongoing modest impact into our Q4 guidance. We’ve seen our revenue product development, both related to and distinct from ATT, improve the performance of our products, and we expect that to continue. Let me quickly turn to a couple of points regarding our outlook. We continue to expect total revenue to grow faster than expenses in 2021, excluding the litigation settlement announced in Q3.
So, remember, back at the Analyst Day, we mentioned that we had been 85-15 brand DR in terms of ads on Twitter and that the long-term goal is to get to 50-50. We said it wouldn’t be a straight line to get to 50-50 because, for a variety of reasons, we could see the brand outperform DR in any given quarter or in any given year. But we think that over time that’s the right mix for Twitter to be at. We feel like we’ve made really good progress having rolled out a new version of MAP, having made a bunch of improvements to website clicks, and including the carousel that we talked about earlier.
First, on SKAdNetwork, it’s hard for us to speak to what others have done. And a lot of this is that we’re coming at things from different angles. So, we continue to work hard to give advertisers reporting at whatever level customers allow us to around the success of their campaigns and the SKAdNetwork has done a couple of things for us. One is, it opened up more inventory where we haven’t been able to report to advertisers on how their campaigns have done before. And we are now able to show 30% more iOS customers Ads, and then report on them on an anonymized aggregated basis.
Two is that we’ve worked hard to help the measurement partners have access to SKAdNetwork and did this early enough to make sure that people could benefit from it and on average, I just can use that to the best of their ability. There’s just a lot of signals, both from showing ads to people and also reporting and how campaigns have performed on Twitter historically, where there has been room for us to improve.
So, Brian, one, because we have a smaller DR business and we’re trying to grow it over time, we’re not — there isn’t signal that we’ve been leveraging perhaps at the same extent as others, that we’ve lost. A lot of this is an opportunity that’s in front of us, whether it’s right to show people a more personalized experience on Twitter by asking their permission to do so, after having built trust with them through how we show up as a Company and how their timeline works and giving them the ability to turn off the algorithm at the top right of the app, or other things that we do.
Secondly, there’s that signal that Jack was talking about earlier that we typically or historically just haven’t leveraged as well as we can to show people map as they show their website, click ads, to help them buy products or goods and services on Twitter. So it may just be that there’s a lot of signals that are unique to Twitter that we haven’t done as good a job of leveraging in the past as we expect to do in the future and with additional resources with a focus on monetizing Twitter with the DR road map that we’ve laid out and talked about over the last few quarters, we’re optimistic that we can continue to improve the relevance of Ads on Twitter, be it brand or DR, relative to where we’ve been in the past.
GOOGLE
Philipp Schindler, Chief Business Officer
Returning visitors to online stores were up fourfold in the first half of 2021 versus 2020, which leads me to Retail, where we had another stellar quarter. We’ve seen explosive growth in Digital over the last 27 months. But as the world begins to reopen, shoppers are returning to stores. Brick and mortar aren’t dead. Instead, omnichannel is in full force.
Searches for open now near me are four times globally versus last year. Strong growth in Local Shopping queries means people are researching the visits to stores more often before they go. As a result, we’ve seen more advertisers include in-store sales alongside e-commerce goals to drive omnichannel growth. Adoption has nearly doubled over the past year.
Our direct response momentum remains strong, video action campaigns are driving more conversions than previous formats, and by adding product feeds to these campaigns, advertisers are achieving on average, over 60% more conversions at a lower cost than those without. Our brand business is also performing well.
As I said last quarter, YouTube’s reach is becoming increasingly incremental to TV. We’re helping advertisers find audiences they can’t find anywhere else. Connected TV is driving part of this growth, is our fastest-growing screen. The precision of digital paired with the scale of linear is proving to be an awesome combo.
And even more so now with the expansion of video action campaigns for CTV. Advertisers can now drive conversions on the big screen, which brings me to help brands of all sizes continue to buy YouTube at both ends of the funnel to create future demand while they convert existing demand. And they’re seeing the upside.
For example, we found that advertisers using both DR and brand video see brands driving 28% of conversion assists. Domino’s Pizza is a great example. the UK business delivered a 9x return on ad spend on their direct response campaigns when paired with our brand campaigns. Lastly, I’ve said it before, and I’ll say it again: our success is only possible because of our customers and partners.
So, to the second part of your question, we continue to watch countries as vaccination rates climb and local regulations ease. We expect some amount of heterogeneity in recovery depending obviously on location and vaccination rates. But because every region is different, it’s hard to make a generalization from the data right now. That said, the consumer shift to digital is real and will continue even as we start seeing people return to stores.
Shopping habits have ebbed and flowed over the last 20 months. But the underlying takeaway is that people want more choice. They want more information, more flexibility, and we don’t see this reversing. Omni-channel, I talked about it, is definitely in full force. I said this earlier. We’ve been really focused on building features and solutions to help retailers, large and small, succeed here.
So, from our standpoint, we see ATT is one aspect of the many broader ecosystem changes that are on the way, and we’ve been investing in privacy-preserving technology for many years. Our focus is on supporting developers, small and large advertisers, creators’ publishers so that they’re able to mitigate impact to their businesses.
And we really see the future of digital advertising is built on advances and privacy preservation on device technologies that support the free and open Internet. And obviously, a robust ads ecosystem on your supply chain questions. I would say performance in Q3 was strong across revenue lines, regions, and nearly all verticals.
Ruth Porat, Chief Financial Officer
Starting with the iOS 14 changes. So overall, as we said, we’re pleased with the strength across our business in the third quarter, it was broad-based, it was global. In terms of the iOS 14 changes, specifically, they had a modest impact on YouTube revenues, which was primarily in direct response. I think as you all know well, focusing on privacy has been core to what we’ve been doing consistently.
PINTEREST
Todd Morgenfeld, CFO & Head, Business Operations
Finally, we don’t believe we saw a material revenue impact from Apple’s ATT policy changes during Q3. That said, it’s still too early to predict the long-term revenue impact of these and future iOS changes.
Benjamin Silbermann, Chairman, Co-Founder, President & CEO
And so, we think that we have a unique value proposition in that space. So, one strategic goal is to better deliver on our mission through rich interactive video, and we think this will both deepen engagement over time and drive actions to shop behavior.
Look, we’ve been talking about being prepared for the shifts in the privacy landscape for quite a while. And so, for the past 3 or 4 quarters now, we talked about investing in first-party measurement.
Now look, we don’t believe that in Q3, we saw material results. But over the long term, we think that any loss of signal is not helpful in our effort to provide value to advertisers. And it’s just early to tell. The long-term revenue impact of Apple policy changes.
The reason we don’t think we’ve seen as much of an impact is multifold. One is that historically, app install ads, which depend heavily on the usage of IDFA, have not contributed a meaningful amount of revenue. We deprecated that format altogether in 2021, so we didn’t have much exposure to the loss of signal.
And then finally, look, the newest investment is an investment in a creator ecosystem in online video. I said it before, but I think online video and mobile video, it’s still in their infancy. You’re going to see verticalization happen over time. I think Pinterest is really well-positioned to pioneer new media formats to do both inspirations and allow creators to facilitate action, providing different revenue models for them in the future. So that’s what’s underlaid our strategy for the last couple of years. We’ve been pretty transparent about it.
WPP
Mark Read, CEO
Again, look, I think from our perspective, we haven’t really seen a negative impact of the Apple changes. As we said before, it’s beginning to become a more complex world from a data and privacy perspective.
I think that makes the advice to give our clients more important. It will have an impact on individual media owners, depending on their business model. And I think those that have been impacted have been those companies that tend to have sort of a big app download business, which is linked very carefully to the ability to track what’s happening. That’s not part of the business in which we really operate, so I think accounts for the — perhaps the surprises that you saw there.
Turning to the question about the brand, look, I think that the third-party cookie in a way that data was treated meant that clients could operate in a very data-rich environment without thinking too hard about where the data has come from or what permissions they needed to use — to have to use it. Clearly, that’s changed. And they look at platforms like Facebook and Google and see them both as ways to reach consumers, but also very data-rich ways to reach consumers. And as data privacy standards become stricter, and platforms like Apple, Apple really cuts across those platforms’ ability to link their data out into the outside world.
So, you’ve really got two businesses, Facebook, and Google, who have really rich platforms, but Apple has stopped them activating that data off of those platforms. So ironically, it’s going to have a dual effect on the plan. At one level, it is going to make you think harder about, well, how we collect data and how we build our own set of data. This is a sort of first-party data question.
If anything, though, it’s going to drive more of their spend on Facebook and Google because it’s harder for them to activate that data off of those two platforms. So, I don’t think it’s going to lead to spend moving away from it. If anything, it’s going to direct more spend to those platforms and strengthen their position in the overall ecosystem.
SNAP
SNAP NOTES: EVAN SPIEGEL, CHIEF EXECUTIVE OFFICER AND CO-FOUNDER
We are continuing to work through the ongoing changes to digital advertising driven by Apple’s app tracking transparency framework, which was introduced as part of iOS 14.5. We saw meaningful adoption in June and July when Apple pushed all its users to update to the new version of iOS. Broadly speaking, these changes have upended many of the industry norms and advertiser behaviors that were built on IDFA, Apple’s unique device identifier for advertising over the past decade, which now require a double opt-in by users to access directly. As part of these changes, Apple rolled out SKAdNetwork or Scan as a proprietary solution to allow app-based advertisers to continue measuring their advertising on iOS.
The initial results we observed using Scan were generally aligned with prior industry-standard solutions and we were among the first platforms to lean into this solution and push for widespread industry adoption. However, over time, we saw Scan measurement results diverge meaningfully from the results we observed on other first and third-party measurement solutions, making Scan unreliable at a stand-alone measurement solution.
Furthermore, as our advertising partners have explored and tested Scan solutions, they have serviced a variety of concerns about its limitations. Every advertiser has their own unique fine-tune perspective on the optimal parameters to measure ROI for their business, but Scan requires them to use Apple’s fixed definitions of advertisers’ success. For example, advertisers are no longer able to understand the impact of their unique campaigns based on things like the time between viewing an ad and taking an action or the time spent viewing an ad. Additionally, real-time campaign and creative management are hindered by extended reporting delays and advertisers are unable to target advertising based on whether or not people have already installed their app. As a result, we have accelerated our focus on developing additional first-party privacy-based solutions to help our advertising partners measure their campaigns effectively.
Our primary solution is advanced conversion, which works seamlessly with our mobile measurement partners and users aggregated privacy safe methodologies to help advertisers understand the impact of Snapchat and their media mix. This solution is now launched for all eligible advertisers, and we’re encouraged by the early adoption we’re seeing from apps. Even with the basic features that we have approximately 50% of app advertisers opting in via their media measurement partner or direct integrations. We are excited to invest in both third-party and first-party solutions to provide a richer set of privacy-safe tools to our partners to help them measure and optimize their advertising.
Separate from these IOs related issues, we’ve heard from advertising partners across a wide variety of industries and geographies that they are facing headwinds in their business related to disruptions in global supply chains as well as labor shortages and increasing costs. In turn, we expect this to impact advertising demand in Q4 as in many cases their businesses do not have the inventory or operational capacity to support incremental demand. We expect that some of these clients may opt to slow their marketing spend given the diminished need to drive incremental demand at a time when their supply chains are not able to operate at peak capacity.
Our advertising business was disrupted by changes to iOS ad tracking that were broadly rolled out by Apple in June and July. While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS. We have remained very focused on driving ROI for our advertising partners, and we continue to see strong, consistent performance on our ad platform based on first-party data and conversion lift studies and are working on building flexible first-party tooling and measurement solutions to serve the diverse needs of our advertising partners.
This impact was compounded by the ongoing macroeconomic effects of the global pandemic, with our advertising partners facing a variety of supply chain interruptions and labor shortages. This in turn reduces their short-term appetite to generate additional customer demand through advertising at a time when their businesses are already supply-constrained. The ongoing magnitude and duration of these global supply and labor disruptions are inherently unpredictable, and in the meantime, we are focused on supporting our partners in this uncertain environment.
While it is difficult to predict the trajectory of these challenges, the growth of our audience, the adoption of our new products and platforms by our community, and the underlying efficacy of our 3 advertising products for performance advertisers give us confidence in the future of our business and our ability to navigate this environment as we continue to invest in our long-term vision.
SNAP NOTES: JEREMI GORMAN, CHIEF BUSINESS OFFICER
Over the last couple of years, our direct response business has grown at a faster rate than our brand business. This is something of which we are incredibly proud and continue to feel is the right strategy for the long-term. Proving performance and delivering ROI are our top priorities, and we have made significant progress over the past several years. As we have mentioned for the past few quarters, DR has grown to comprise over 50 percent of our business. While this has been a historic strength, given the recent ATT changes, coupled with Snapchat’s existence as a mobile-only platform, our strength in 6 DR has become a more significant headwind in the current environment; however, we still believe that in time, every advertiser will be a performance advertiser, and despite the recent shakeup in the ecosystem, driving DR performance is the right strategy over the long term.
Separate from these iOS-related issues, we have heard from advertising partners across a wide variety of industries and geographies that they are facing headwinds in their business related to disruptions in global supply chains as well as labor shortages and increasing costs. In turn, we expect this to impact advertising demand in Q4 as, in many cases, their businesses do not have the inventory or operational capacity to support incremental demand. We expect that some of these clients may opt to slow their marketing spend given the diminished need to drive incremental demand at a time when their supply chains are not able to operate at peak capacity.
As we look forward to Q4, we face a variety of challenges in the operating environment, including the iOS platform changes as well as macro uncertainty driven by supply chain disruption and labor shortages. The fact that these challenges are largely exogenous makes the provision of guidance particularly challenging and complex. We expect that the measurement and optimization foundations of the digital advertising economy will continue to experience significant changes in the months ahead, including additional disruptions we expect related to the adoption of iOS 15.
We are focused on helping our partners navigate these changes, but we still expect these headwinds to continue to impact our business throughout Q4 as the adoption of new measurement solutions will take time. It is still not clear what the longer-term impact of the iOS platform changes may be, and this may not be clear until at least several months or more after the ecosystem stabilizes and advertisers are able to fully implement the new solutions we are developing.
CALL TRANSCRIPT
Evan Spiegel, CEO
Hey, Rich, thanks so much for the question and I’ll share your disappointment. This has definitely been a frustrating setback for us, but I think over the long term these privacy changes and protecting privacy for users of iOS and the course of the soundtrack community are really important for the long-term health of the ecosystem and something that we fully support.
I think when we saw these changes coming, our primary focus was the performance of our advertising platform in the face of signal loss. Could we still really drive advertising performance, optimize campaigns, make sure our ads were in front of the right people? We spent the vast majority of our engineering time, effort, and energy making sure our ads were still really effective. And we did all sorts of revenue backtesting to make sure that we could be revenue-neutral. We were really confident in our ability to drive results with our advertising platform despite the signal loss.
But I think we really underestimated where the tooling changes. And so, what I mean by that specifically is that advertisers have essentially for a long time now used a set of really sophisticated tools to measure and optimize their campaigns. So that allows them to test out a bunch of different creative and see what’s performing more effectively, so on and so forth. And the big change there was that with these new Apple changes, those tools were essentially rendered blind and, in their place, Apple released a new product called SKAdNetwork that allows advertisers to measure across different advertising platforms, but without a lot of the flexibility that they’re used to.
So, for example, you can only really measure your advertising results using the success parameters that Apple has already defined. The reporting is delayed for a significant period of time and often unavailable if you don’t hit a certain threshold of conversion. It’s very hard to see performance on a creative level. But of course, it does have the benefit of being able to look across different advertising platforms.
So, what we’ve done is built our own solution called Advanced conversions that allows people to do much more sophisticated things and really get the benefits of a lot of flexibility using the advanced conversions products so they can understand performance at the creative level, optimize for down funnel conversions and things like that, and we’ve been working really hard to make that solution more effective and help advertisers on board.
But the obvious challenge with advanced conversions is that it only has Snapchats first-party data. It doesn’t have the benefit of looking across all of the other advertising platforms. So, what advertisers essentially have to do is use both of those tools, SKAdNetwork, and advanced conversions, and the way that they are able to understand the performance of both is by running incrementality testing. For example, that shows you how to perform, and your advertising is on different platforms. And that process adopting as SKAdNetwork, adopting advanced conversions, running incrementality, testing, and really building trust in these new solutions after the tooling you’ve been using for a decade has essentially gone away, that just takes time and it’s really challenging.
So, we definitely underestimated that impact for advertising partners. We’re working through it. We’ve certainly seen some early signs of success. But it’s going to take a little while.
Jeremi Gorman, Chief Business Officer
We are definitely focused on assisting our advertisers in terms of navigating this environment. It’s the most important thing that we can do as Evan mentioned, it’s definitely a change [Indecipherable] that they’re used to over the last decade or longer, and we want to make sure that we’re with them every single step of the way to ensure that they have the solutions that they need in place to measure the efficacy of their advertising is a much important priority.
So, here’s what we’re doing. There is kind of three primary areas where we see the opportunities to help them. The first is for the advertisers can choose to utilize SKAdNetwork we’re sharing best practices to best ensure that advertisers can remain successful as they test and learn with less information than they’re used to as Evan mentioned.
Secondly, onboarding advertisers into our first-party privacy sage solutions such as advanced conversions, are working seamlessly with our mobile measurement partners and uses aggregated privacy safe methodologies to help advertisers understand the impact of Snapchat and our media mix, and that’s also new. So that’s important to know advanced conversions and people are also going to have to take time to test and learn to better understand how it works in partnership with SKAdNetwork and so on and so forth. We’re working with them, product engineering as well as sales, account management, and the whole team holding hands with our customers to ensure that they get the best experiences.
Third, we are investing in growing our set of native experiences and that will allow advertisers to drive ROI with deeper experiences, but all within Snapchat. So, one of the things that are really important about that is that they will be able to get signals from within our app itself, which includes our augmented reality experiences. Mini’s, which we’ve talked about, business profiles that are growing, and we’re excited about, as well as the native commerce products that we’re building with Shopify and their advertising assets, for instance. We think this approach is reflected in our success, driving the continued growth in active advertisers and again grew in Q3 both year-over-year and quarter-over-quarter to their highest level ever and so that gives us some good confidence there.
In terms of just [Indecipherable] in general, our first-party measurement tools and studies continue to show that our ads are effective, and they are approximately as effective as they were prior to these changes. So, it’s really that the loss of signal required significant changes to our overall technology. We believe it’s actually mostly a measurement challenge, not a question of the efficacy of our advertising.
As we talked about before, it’s going to take time for advertisers to sort through what they’re seeing in their new measurement solutions, and relative to what they have available to them, including in SKAdNetwor network and with conversions studies. We are optimistic that our first-party solutions including advanced conversions and estimated conversion are going to help close that measurement gap for our advertising partners and we look forward to seeing those be fully adopted. And in the meantime, we’re going to be validating with our partners, third-party, first-party, a few things like conversion lift studies as well as MMM studies, etc., to calibrate across.
Derek Andersen, Chief Financial Officer
I think — what I would say is when you look at Q3 and the impacts that we saw in Q3 relative to our expectations entering the quarter, the majority — the primary driver of the impact there is really about the impact from headwinds associated with the platform changes on iOS. Those changes accelerated as we moved through the quarter. So, what you’re seeing when we go into Q4 is a full quarter impact of those issues on Q4. And the reason that we’re mentioning iOS 15 is that it’s going to continue to disrupt the advertising ecosystem which is critical to getting a stable base from the advertising ecosystem so that advertisers have some stability to then be able to adapt tools, test tools, and understand the impact is really important. So that is contributing to the iOS headwinds persisting throughout Q4.
ZYNGA
Ger Griffin, Chief Financial Officer
That said, with improvements in user acquisition yields, we are ramping our marketing investments against our live services and new game launches in Q4, and we expect this investment to contribute to our growth in Q4 and ’22. For Q4, we expect the GAAP cost of sales as a percentage of revenue to improve year over year primarily due to the positive impact of the change in deferred revenue, partially offset by amortization expense.
Overall, we indicated we expected to see some weakness in Q3 and potentially into Q4 later than we had previously expected with the whole IDFA rollout. As it relates to Q3 performance, as we highlighted, our hyper-casual portfolio is doing really well.
That portfolio continues to grow and drive momentum in our overall addressable advertising audience base. And that plus yields were actually a little bit better in Q3 than we expected. Also, we expect that momentum to continue into Q4. But as I indicated, we do see — we did see a little bit of softness in October.
Coming through the end of October, it was picking up again. So, we expect Q4 will be a very strong advertising quarter as well, just a little bit less than what we would have implied in our guidance when we set up at the last earnings call.
On the advertising side, Chartboost is — obviously, it’s in the building and is getting integrated, but there wasn’t much of the improvement there, I would tag against Chartboost in Q3 or Q4 because it’s early days yet. I think as I said earlier, we will see — as I said, to Drew’s question, we will see more material improvements and opportunities from Chartboost as we get into ’22 and beyond. So, from that perspective, if you look at Q3 with the profitability beat and if you look into Q4, we did see toward the end of Q3 — as we said at the last earnings call, we’ve seen across the board improvement in the UA landscape.
And the benefits from not spending as much in Q3, we’ve layered into Q4 from an investment perspective because we see the opportunity to not just drive FarmVille, but obviously lean in against some of our live service titles. In terms of the marketing strategy around FarmVille, it’s across the board. It’s not fixated on any one platform. Obviously, the historical legacy of FarmVille was very much linked to Facebook, but we’re now in a very diverse marketplace where mobile is beyond Facebook, it’s everywhere.
So we’re actually investing in user acquisition across multiple channels.
Frank Gibeau, Chief Executive Officer
I want to provide additional context on how Zynga is positioned as a leading player in the interactive entertainment industry. We are on track to finish 2021 with Zynga’s best-ever annual top-line performance and the largest mobile audience in the company’s history. We are also excited about the long-term growth ahead for interactive entertainment.
Some of these include direct-to-consumer billing, NFTs, and blockchain technology, as well as games on popular social platforms like Snap and TikTok. The industry is undergoing significant consolidation within mobile and ad tech. With our anticipated increase in net cash flow generation, we expect to acquire more talented teams, franchises, and advertising technologies to further accelerate our growth. In summary, there has never been a more exciting time at Zynga.
The playbook right now is getting developed, but it has a lot of fundamentals that are common between mobile and console. We’ll be using UA. We’ll be using a lot of PR, channel marketing, first-party marketing.
The first place that we look at is wholly-owned IP because it gives us more flexibility in terms of how to approach the opportunity. A lot of this early-stage development and work that we’re going to do is about really understanding the category, the dynamics, where the heat is.
So, we want to use wholly-owned IP for maximum flexibility. In terms of the categories that we think are most interesting, the builder category certainly is one where you have real estate, you’re building value in a farm, for example. Also looking at collecting cars, RPGs, collection mechanics, RPG mechanics, and builder mechanics, we feel like are probably the first places that we’ll look. It is early days.
I think from the perspective of what’s going on in the mobile ecosystem, the vision that we believe in at Zynga is that the next generation of mobile game companies and, you know, successful companies are going to have a platform component to what they do. We are an app developer and publisher, and we’ve started building out our ad platform and publishing platform.
And our view is that that symbiotic nature between first-party content and data when combined with an at-scale ad platform, can create a powerful competitive advantage. And as you noted, there are several examples of companies that are starting to bring that to life as a concept. That’s something that we’ve been thinking a lot about. And we’ve been, as you know, from the Chartboost acquisition, we’ve been working against now for a good bit of time.
The UA market has improved to the point where we felt comfortable enough to launch FarmVille 3 last week. So that’s a title that is currently releasing with very good momentum. We’re starting to layer in user acquisition spending.
We’re also gradually building up the live services spend as we head into Q4 leaving this quarter. There was a period of time, as you know, that we pulled back on spending and really looked at how the systems were operating with all the changes. And we felt comfortable that as we got into October and early November that really the worst of it was behind us. Right now, we feel like the tools and the techniques that we have to allow us to successfully release new games and scale them.
It really — Android obviously, is still operating as expected, but we’re getting very comfortable with the changes that have happened on the Apple side, and we feel like that, that’s going to be something that we can use as a growth tool as we go into next year and launch new games like Star Wars: Hunters and Star Blast and Pirate Evolution! So, we feel good about that.
I’ll start with a look at the ad business. We definitely see contributors to the ad business growth coming from hyper-casual. We think that Rollic has a system that is repeatable, that can continue to put out hit games, and we have further expansion from a territory standpoint from the types of products that we’re building. So, we believe that that is going to be one place to look for growth.
The second is our core games. There are additional inventory opportunities inside of our existing live services portfolio, where we can put more watch-to-earn inventory and enable other games that haven’t quite yet been integrated with Zynga fully into the ad stack. Also with the core games, our new releases have advertising contemplated in them. For example, FarmVille 3 has a watch to earn already operating in it.
So, between the expansion of inventory and live, new games releasing, hyper-casual, that’s going to account for a lot of growth. But in addition to that, growing the third-party ad business through Chartboost and through other parts of the network that we’re going to build out, we believe, longer-term, that can be an important part of our business overall for sure. We’re starting at a level that is not contributing a significant amount right now. But as we head into ’22, and we start to expand Chartboost integration into Zynga, as well as the rest of the industry, we think that that can be very helpful to us.
The other parts of the platform that we’re looking at in the near term, we continue to augment and integrate the DSP, the demand side piece. But we’re also looking at mediation and supply-side technologies and products that will expand the overall capabilities of the platform and further attributes beyond that. We’re investing a lot in machine learning and other components that will drive yields and look at other components of the platform that need to level up in order to really start to hit scale.
In terms of the direct-to-consumer idea, it takes a couple of different forms. Obviously, on the PC, we can go direct to the consumer. So, we can work with other platforms to distribute, bill, handle customer service and all the other services that you potentially get from mobile platforms, for example, or console platforms.
So, look, for us to — part of our PC strategy and Mac strategy is to start to develop these muscles and these capabilities for D2C. If the mobile ecosystem opens up at some point in the future for direct-to-consumer billing, then we have the ability to do that. It would obviously be a tailwind for our business. But it’s difficult to forecast that event given the activity in the courts.
But our goal is to be in a position for D2C. It includes things like building out our Zynga identity system that we have in place, using email, and we’re accumulating and building out those capabilities across our live services where we can and on new platforms that we’re building out. In terms of the geos, I would just highlight, frankly, all of them, we’re doing this in North America, Europe, as well as Asia where we can go direct, especially on the games that we start to release that are cross-platform. That will be an increasingly important opportunity, too.
How do we start to bring NFTs and blockchain technology into Zynga’s existing portfolio, our owned IP-developed games from inception that are built with NFTs as part of the core gameplay loop? We like the timing of this. Obviously, it’s a category that’s getting a lot of capital and talent right now.
MATCH
Gary Swidler, Chief Operating Officer & Chief Financial Officer
So, as you rightly said, Hyperconnect — this feeling is because their marketing approach is impacted by the elimination of IDFA. We’re feeling it in other parts of our business too, like at Match and Meetic, which are significant marketers as well relies on marketing. We found good creative ways to work around it to some extent and offset some of the impacts, but there is still impact, I mean businesses that rely heavily on marketing.
So, all of that is baked into our numbers and our performance that you’re seeing for this year and our outlook for Q4 and into next year, we’ve included all that. It’s not very significant to us, but there is some impact. And we’re not able to outrun it completely, but through creativity and some good solves and adjusting channels and so forth, we’re able to offset some of the impacts. So, all of our numbers include the impact, but it is a new fact of life that we are dealing with across our business and our marketing teams are doing a great job finding ways to offset it wherever they can.
The first is COVID, Hyperconnect, and Azar have a significant presence in Asia and the Middle East. I mean, as I just talked about, COVID continues to be an issue in many of those markets. And you’ve got a lot of people living at home with their families spending lots of time at home and it has changed the interaction of the consumer with the one-to-one video chat app at Azar. And so, we’re looking to evolve the app in ways that change the experience and make it more conducive in the current environment.
Azar does a lot of performance marketing as we talked about in another context. The market environment has become more competitive and also more challenging as a result of changes that Apple has made around IDFA.
There are many unknowns regarding Apple’s plans for IAAP, including whether and how they intend to comply with the law of banning mandatory IAAP in South Korea and injunction the epic decision, which requires them to eliminate the anti-steering provision by December 9, 2021. We’re going to watch these developments around the app stores for at least another few months before we provide our EBITDA outlook for next year. We’re optimistic more changes in the ecosystem are likely.
Shar Dubey, Chief Executive Officer
Yes, you know what? I’m going to take the opportunity to talk about the app store a little bit more broadly, all the puts and takes that we’re seeing and what we think is likely to happen. So, you know there has been a flurry of activity on the app storefront, particularly in the last few months. South Korea became the first country to outlaw mandatory IAPP. Additionally, at this point, there are either active investigations, litigation, or proposed legislation across the globe, including countries in Europe, the UK, Japan, India, Australia, and the US. So, here’s what we see at a practical level. Google appears to be compliant with South Korean law. That does not seem to be the case with Apple, yet. Google has reduced its fees on subscriptions, but not on a-la-carte from 13% to 15%, which is going to be effective January 1, 2022.
Now recall Google had a while ago announced that they will be enforcing mandatory IAPP and they delayed that decision to March 31, 2022, and we are as of now unsure where they stand on that policy change. Interestingly — it’s been a while since the Apple and Google app store economics are not in sync. And so, you have to see how Apple responded to the Google change in rates for a subscription. All the anti-steering provision injunction ordered by the judge in the Epic Case, Apple has appealed it, but — and they have not yet communicated how they intend to comply with it.
So, all that to say there was a lot of things sort of have happened, happened, about to happen, it is meaningful for us. As we said in the letter, our 2021 IAPP fees are expected to be north of $550 million and it will be materially higher in 2022. About 70% of our revenue comes from subscriptions and Google does not yet require a mandatory IAPP fee. Approximately 80% of our IAPP fees actually go to Apple. So, a lot of moving parts and we have not yet accounted for any impact from changes to IAPP fees in our outlook.
Generally, in Q4, we expect very minimal impact. But depending on — given all the scrutiny that’s going around the world, and some of the developments in the last few months, I do think this will continue to break and it will be a beneficial change to consumers and to developers and depending on when and what and how this breaks, the outcome for us is pretty varied. So, we’re watching some of these milestones that are coming up in the next few months. Hopefully, it will give us some more clarity and we will be able to communicate a little better in our next call.
The — my final thought on this is, I’ve never seen a point in this IAPP absolute ratio where there has been so much activity around the world, and you know at some point Apple has to take a step back and ask themselves whether this is still the right thing to do. And so, another reason why I think this will change in some way.
BUMBLE INC.
Whitney Wolfe Herd, Founder, and Chief Executive Officer
Web 3.0 is all about community and treats everyone in the community as participants who together make the community what it is. Built on blockchain technology, we believe it will enable a level of participation and empowerment that will make our mission come to life. In the near term, this means new engagement, participation, and creator models.
But as we said last quarter, Badoo operates in a large number of markets where the pandemic is still a significant challenge. And the core Badoo user community, which is predominantly in the urban middle-class segment, continues to face economic pressures from COVID.
And so, we’re very, very excited about the future of video chat and not only video one-to-one. When you think about the video more broadly, right, as it pertains to the current experience and even as it’s interwoven into Web 3.0, this is such an incredible mechanism to socialize, to have the opportunity to get to know people through interest or through common topics, share joy, struggles. You’ll see this emerge in the future for platonic relationships as well as romantic ones. Video is a great way to get to know each other.
Anu Subramanian, Chief Executive Officer
Sales and marketing expenses were $52 million, up 41% year over year. This represents 26% of revenue compared to 23% last year. Most of the increase was due to reentry marketing campaigns and new market launches for Bumble as well as some performance marketing and rebranding initiatives for Badoo.
So, I’ll just talk about both Apple and Google and what we are seeing there. So obviously, there is a lot that has happened in the last few months around the topic of the App Store fees and we’ve been following it very closely.
Things are changing pretty fast, and things are quite fluid. The most recent ruling, of course, in the Epic case, especially as it relates to the anti-steering provision, we believe these are absolutely a step in the right direction as we think about what happens to the experience of developers like us. Especially given yesterday’s news around the appeal, we are waiting to see how Apple will enact the specific policy and the change, so we can ascertain how we will be linking to third-party payment systems going forward. There are still some outstanding questions to be answered before we can definitively say what this looks like, especially since an iOS user has historically never had the ability to sort of choosing non-Apple payments.
Having said that, we do have deep expertise today in enabling non-App Store payment systems. So, once we get clarity on that front, we feel actually very good about being able to build the right payment experience for our users. And obviously, off the total amount of money that we pay to App Stores today, a huge majority goes to Apple. So, we are watching what they will do very closely.
With respect to Android and Google, again, the news that they are dropping the fees from 30% to 15%, we see as very positive in terms of what this could mean, again, for the overall app ecosystem. A majority of revenue today for our company, especially on Bumble, is via subscription. And so, this change in fees is especially relevant for us and important. And Google has been a fantastic partner to us on several fronts.
Also, we actually look — are looking forward to working closely with them to figure out how this will play out. And if Google were to mandate Google Play billing in March, then we would have to figure out the corresponding offsets around that versus the reduction in the fees and the puts and takes around that. So, we still need to work through all of this. It’s a little bit early to quantify the benefit, but we are thrilled that the changes are happening because we absolutely believe these are the right steps for Apple and Google to be taking.
So we are tracking this closely and we look forward to providing more information in the future.
I think just to remind everyone what we have said before and it remains true this quarter, that only about one-fifth, 20-ish percent of our new user acquisition comes in through performance marketing. The remainder comes in through organic means, word of mouth, and some of the results of the brand that we’ve built over the last many years.
As you dig into that performance marketing side, I continue to be very, very proud of the team and their ability to navigate through all the IDFA and just changes going on in the online advertising world. We have not seen any material degradation across the board around our marketing efficiencies on performance marketing. This is something our team has really managed their way through very, very effectively. What we are seeing is some channel mix.
The team is very on top of that. Apple Search Ads are, as a number of other people have said, quite successful. There’s been a little bit of a rush to advertise on Android and acquire people on Android. So that’s led to a little bit of price inflation on the Android side.
But overall, we are very happy with our ability to navigate through that, and our team is very focused now on how do we take those lessons and use it to continue scaling the business.
UNITY
John Riccitiello, President, and Chief Executive Officer
I think topical right now and challenging for investors is you see a lot of quarterly results and some companies pop up as a winner and some companies haven’t popped up as a winner post the roll-through of the IDFA changes introduced by Apple. Something I’ve been saying for a very long time is that Unity benefits from a very unique data set, driven by over 3 billion people, MAUs in our analytics platform, and hundreds of millions on our IAP platform. So, I’m going to introduce something that I think probably most of you think is pretty obvious, but I’m going to emphasize it again. Most ad networks, their business is based on the identity, the specific identity of the user interacting with the application.
Ours is not, ours is based on understanding contextually where they are and what they’re doing and what they’ve done before and what they’re going to do next using predictive models based on AI on the 50 billion-plus data events we adjust per day. And as we intimated in the call nearly a year ago when we were talking about the early innings of IDFA, we felt that that would lead to a relative competitive advantage for us, as one advantage for the alternative way of driving modernization became weaker, relatively weaker. And that’s exactly what’s happened. So, I would argue that the puts and takes, come down to a really simple thesis.
Ours is a better way to monetize even absent the changes that were introduced by Apple with IDFA and choice around privacy. And on a relative basis, we gained an advantage over all those who use identity, individual identity, they know you and your brother and whose birthday it is that became relatively weaker, and we became relatively stronger, and we have the single largest, largest data insight based on the largest MAU count for anybody in our world. And, more or less, it played out to a script almost exactly as we’d hoped, but better than we were willing to forecast given how cloudy it was a year ago.
Luis Visoso, Senior Vice President and Chief Financial Officer
Here are some of the key financial highlights for the quarter. Total revenue of $286 million increased by 43% as compared to the third quarter of 2020. Operate delivered another very strong quarter with 54% year-over-year growth. Create accelerated in the third quarter and delivered 34% year-over-year growth.
We also launched Unity Mediation which includes waterfall and bidding within Unity Ads. These mediation offerings are designed to help developers build additional strong revenue streams by easily optimizing demand for their best-performing ad formats and network partners within the same editor and interface they built and manage their games experience. Create delivered 34% revenue growth for the quarter as we accelerated from the prior quarter.
APPLOVIN
Adam Foroughi, Co-Founder, Chief Executive Officer, and Chairperson
First, consider how fast we are growing. Our software platform revenue just grew 385% year over year to $193 million. Our growth has been accelerating for four quarters in a row now, largely organic. We quadrupled our new SPECs and our net dollar-based retention was 255%.
Second, consider the massive opportunity still ahead of us. As the market absorbed IDFA changes, most advertising platforms saw modest sequential gains. Yet our software business grew 32% quarter over quarter. We were growing fast before platform changes and continue to do so after, which is a testament to the strength of our team and our technologies.
We believe our unified platform should surpass $15 billion in advertiser spend across all industry bidders entering 2023. This would make our exchange one of the largest advertising ecosystems in the world.
On the first question, the IDFA impact in the marketplace, as you saw in our numbers and a lot of advertising platforms, advertising quarter over quarter was mostly muted in terms of growth. So, there is a loss in terms of targeting that’s possible with IDFA going away, and publisher CPMs did diminish on iOS.
That was offset on the publishing side with games on Android as demand shifted over there. Now our platform, we have an advantage in the marketplace because of our scaled first-party data that fuels our AXON machine learning system. And as prices came down and competition lessened, our platform stood stronger than others, and that’s what allowed us to grow faster than others. That, paired with the fact that we were already on a really fast growth trajectory because of AXON quarter-over-quarter for the last few quarters, and that continues to accelerate, led to the strong quarter.
Our identity and our data sets and models are built on our first-party data. And so, we ended up in a very advantaged position. We’re also starting from a very low point of penetration with customers. When you talk about a business that’s getting as big as ours as quickly as it is and only having 280 software platform enterprise clients, it leaves a lot of room for growth.
So, we were already executing on all vectors coming in. IDFA changes help decrease competition in the market. Our business model has advantages that are going to be hard for others to overcome, and we continue to accelerate through it. Now the market is just greenfield for us, and there’s going to be more customers that are going to come on our platform because as we unify MAX and MoPub supply, there are very few ad opportunities in the world at the scale of $15 billion a year of ad spend flowing through one single access point.
And our exchange will be that. And so, we’re really excited about the future prospects of this business. In terms of games and evergreen titles, we touched on this last quarter. We do invest heavily in game development, and in particular, organic releases of games. It’s going to be a focus going forward. In order to continue to facilitate growth in our software business, data is key and first-party data, as we’ve touched on, is really important. So, we do want to keep our content fresh. Over the quarter, we launched three titles that took hefty investment.
So, our scaled first-party data is much more important to fuel the growth of our software side. It helps inform the models on what the users are interested in and what other users that are similar to them are interested in. And that’s really what’s fueling the success on the software side. That first-party data doesn’t inform what we do on the app development side.
And then the third and most important maybe is our audience is around 200 million monthly actives playing our mobile games. We’ve got 3,000 game developers building content for our platform. The audience of our own network is in the $2 billion — 2 billion users a month. So, it’s a massively scaled audience of mobile game players, and then mobile game developers both building games for us and third-party clients of ours.
If we can use that reach, that audience, those games, to then go after some of the newer opportunities in terms of usage and gameplay and ownership to the consumer and things like metaverse and blockchain, that could also be interesting. And so, we think about all of these things. We think we’ve got very exciting assets in place to really go after these opportunities. And over the next couple of years, we hope you’ll see us execute on many of the above.
IRONSOURCE
Tomer Bar Zeev, Chief Executive Officer
We’ve maintained our leadership position in the App Economy, with some of the largest apps, games, and telcos using our platform to grow their businesses. Last quarter 86% of the top 100 most downloaded games across both the App and Play stores used our platform to grow their businesses, and we signed a strategic partnership with one of Europe’s leading telecom operators, Vodafone.
In the third quarter, we achieved record results with total revenues of $140 million, up 60% year-over-year. This was primarily driven by continued momentum across both the Sonic and Aura solution suites and market share gains as we have seen an increase in the use of our platform by both existing and new customers.
Finally, we saw further evidence of the stickiness of our platform and the value it provides to our customers, with a dollar-based net expansion rate for the quarter of 170%. As a quick reminder, the ironSource platform is designed to serve the two core constituents of the App Economy, app developers, and telecom operators. It’s made up of two solution suites: Sonic, which empowers app developers who create the content of the app economy to turn that content into a business. And Aura, which enables telecom operators who provide the infrastructure that content runs on, to create a richer device experience to drive more value and differentiation with end consumers.
A key element in the success of our platform is the strength of our data. This is driven by two main factors: First our scale. Today, the majority of the leading mobile game developers are using our SDK, and our Aura solution suite is integrated on more than 160 million active devices. Second, the comprehensiveness of our platform means we provide multiple solutions for every stage of the app growth lifecycle. This means we are integrated at multiple touchpoints within a customer’s business and are able to get visibility across the entire app lifecycle.
Today, app developers need to be able to run and optimize marketing campaigns across multiple channels in order to grow at scale. With Bidalgo, we’re able to offer cross-channel management and optimization for every element of marketing activity through the ironSource platform.
Like the Tapjoy acquisition, acquiring Bidalgo will also deepen our market presence across the entire App Economy, given Bidalgo’s customer base in-app categories beyond games. It’s interesting to note that many of our existing customers use both Bidalgo and Tapjoy in addition to multiple of our current solutions on the ironSource platform. This not only highlights the value of the combined offering, and expected increased stickiness with customers, but is also a testament to our platform-based approach to the App Economy.
This quarter we announced the launch of two products that support app developers in the evolving landscape on iOS: one that allows app developers to evaluate the quality of an acquired user, and another which gives them critical transparency on their user acquisition performance across all networks. Both these tools are designed to empower developers to continue growing their app businesses in a cost-efficient and profitable way as the industry evolves.
As for ironSource we repeatedly said that we as a platform, as a business platform for the App Economy are going to continue focusing on expanding the platform, expanding the solutions we add to the different solution suites we have within ironSource’s platform.
As for IDFA, as I’ve also repeatedly said in previous calls, we continue to pay close attention to every development in that area, in the ecosystem. I think it’s – it becomes clearer and clearer today that some companies are net beneficiaries of the changes, some are a bit less. And again, as I previously said, so far, thus far we’ve seen IDFA being a net positive. So ironSource is still a bit difficult to quantify exactly.
When we look at the guidance of continue giving, and when we contemplate into the future, we are still taking into account potentially short-term negative effects of IDFA. Though we still haven’t seen them for the last three quarters, also. So, we are still budgeting those IDFA still not completely over. But it’s even clearer than ever before that in the long-term, IronSource, as we already stated, is going to be one of the platforms clearly beneficiary from IDFA.
I think the – the, we’ve been nice about this question about Apple and Epic and our, what we, our approach here is, of course, will all for full democratization of the App Economy. So, we believe developers should have a choice who they want to work with and how, and more choice is always better, and we are all for competition. This is part of the values of ironSource’s platform, right? The full democratization of content creation and so we very much believe in that. As for how I think these might evolve into practically what it means in terms of numbers and who would benefit from that?
So, at the end of the day, there is one basic truth, which is whenever developers can generate higher revenues or whenever their lifetime value, the lifetime value of a user is higher, which is what potentially can happen here. Developers will be able to spend more on user activation, right? Because each user will potentially generate more revenues since they will be gaining, gaining more, more revenue. They will be able to spend that on our platform and others.
Clearly, this is one way or the other, right? Either it will see more competition, or we will see Apple reducing the different fields that they charge. Delta, these additional revenues will flow back into the App Economy, usually in the form of additional user acquisition, because of a sudden user will be worth more for those game developers and they will be able to spend more within the platform. So, I think that’s a very – that’s a clear assumption that I believe we will see.
As for Q4, look so we started a year with I think it was 37% year-over-year growth we’re now at 62%. So evidently, we’ve increased our guidance as we see. When we started the year, there were some unknowns I would say mostly around IDFA how that will roll out? And so, we wanted to be conservative and prudent in the way we budget and the way we guide. As it’s becoming clearer and clearer quarter-after-quarter, that as originally assumed by us, we’re net beneficiaries of disposing of IDFA.
We feel more comfortable increasing guidance as we’ve also done this time, right? We’ve for three consecutive quarters; we’ve increased guidance twice by $30 million now by $25 million. So, we feel very strong with our ability to continuable filming. And looking beyond that we feel very strong with the growth drivers of the business across the different activities that different solution suite. So, I think as mentioned, we feel very bullish about our EBIT did continue – continue growing. Now that IDFA mostly is I think behind us.
In general, one of the main advantages of our ability to target in an effective way is our close relationships and partnerships with all our customers that really generate deep data integrations. So, we have data flowing from many, many of our customers. And of course, when we add more solutions and we have a wider view in the market, of course, that also helps and gives us more data flowing into our systems.
Also, of course, we’ve invested heavily. We continue to invest in our machine learning capabilities and to really have the best data science team out there. And, to be able to get all of this data coming from all of the sources out there and to improve our targeting and machine learning capabilities.
Assaf Ben-Ami, Chief Financial Officer
Our revenue consists of three main drivers: revenue share, usage-based, and in-app monetization. A majority of our revenue is currently generated under the revenue-share model, where we retain a share of the revenue our customers generate using our platform. Our ability to increase our revenue is highly aligned with our customers’ success.
Our guidance takes into consideration the following factors: The recent Q3 results, the momentum across our platform, the near-term potential impact of IDFA, and it also does not include any revenues from our recently announced acquisitions. For the fourth quarter of 2021, total revenue is expected to be in the range of $140 million to $145 million, representing 32% growth on a yearly basis at the midpoint. Adjusted EBITDA is expected to be in the range of $50 million to $52 million, representing 57% growth on a yearly basis at the midpoint. We expect our fully diluted share count to be approximately 1.1 billion shares.
For full-year 2021. We are raising our full-year 2021 guidance for the third time this year. Total revenue is expected to be in the range of $535 million to $540 million compared to $510 million to $520 million previously, representing 62% growth at the midpoint. Adjusted EBITDA is expected to be in the range of $186 million to $188 million compared to $173 million to $178 million previously, representing 81% growth at the midpoint.
Omer Kaplan, Chief Revenue Officer
Of course, look so as a whole balance of that we see billions of unique users a month, right, billions of unique users. And on the Aura side, we have 160 million daily devices that are connected to the platform. That of course, that’s a very, very unique supply source, right? So, of course, with the addition of Vodafone and current and future operators that we will add to Aura, that number will increase and will create a very premium, very high premium, very special supply source that of course will help advertisers, delegate users in a more efficient way, in the most scalable way.
How can we help?
Our market insights and creative expertise come from managing over $3 billion in creative and social ad spend for the world’s largest mobile apps and web-based performance advertisers. Since 2013 we’ve worked with Disney, Roblox, Zynga, Glu Mobile, Disney, SuperHuman, Rovio, Jam City, Wooga, NBA, MLB, Nickelodeon, Yelp, Blue Apron, Ford, Sun Basket, Lion Studios, MobilityWare, and many others. We provide end-to-end creative and user acquisition services for mobile app marketers. We do this via performance-oriented creative storytelling, integrated UA, and creative optimization. Contact sales@consumeracquisition.com to discuss our user acquisition and creative services.
Our Ad Concept Model systematizes the creation of persona-led creatives by mapping competitive ad trends with user motivations. This creates unique paths for concept ideation and simplified communication.
Utilize user motivations to tailor ad creative
Use creative trends and user motivations to create defined paths new ad concepts
Find the creative trends popular within specific categories
In today’s post, we explain our UA Media Buying Model and how it works in tandem with our Ad Concept Model. Learn the media buying best practice strategies for Facebook Android, Facebook iOS SKAN, Google, and TikTok, including:
Increase ad-buying success rate across social platforms leveraging our account structure and media model
Develop and systematize a process to test account configuration and media buying tactics
Increase communication of media buying strategies to stakeholders
As a complementary tool to our Ad Concept Model, we are introducing our Media Buying Model which uses a similar matrixed approach to systematize best practices for user acquisition campaign development. Any mobile app can leverage a unique combination of distinct UA strategies and campaign parameters to develop a robust testing harness for ongoing mobile campaigns across social platforms.
In its most generic state, our Media Buying Model looks like the matrix below, prior to building out a mobile app user acquisition strategy. The entire matrix is tailored to a respective ad network and operating system requirements and constraints. Geographies, languages, and bid types are all modified based on the client’s needs. Each campaign is structured to meet specific goals at the intersection of strategies and parameters.
The entire matrix is tailored to a respective ad network and operating system requirements and constraints. Geographies, languages, and bid types are all modified based on the client’s needs. Each campaign is structured to meet specific goals at the intersection of strategies and parameters.
Testing on Android
Even prior to IDFA loss, Consumer Acquisition conducted creative and UA testing on Android because it was less expensive, and results translated well to iOS. We saved iOS testing for the rare clients without an Android app or those who were solely targeting iOS users.
Android Capabilities
Unlimited ad accounts and campaigns
Unobstructed deterministic tracking
Comprehensive A/B testing with full reporting
Distributed scale and spend across campaigns
Rapid testing, unlimited test campaigns
Success drivers easy to identify and scale
Google Firebase enables tROAS, delivering ~15% lift on CPA campaigns with better user mapping
iOS IDFA Impacts
Many accounts but only 9 campaigns, 5 ad sets
SKAN tracking disabled after 24-48 hours (See AppsFlyer Conversion Studio below)
A/B testing in DCO blobs, no asset reporting
Fewer campaigns, higher budgets, more significant edits
Restricted testing, only 9 campaigns
Aggregate insights drive slower optimization
Post-IDFA, iOS lookalike audiences have lost -65% of their reach and effectiveness
Testing on iOS with AppsFlyer
If you use AppsFlyer on iOS, we recommend testing through Conversion Studio, released September 9, 2021. Conversion Studio helps maximize LTV measurement for post-install activity by:
Extending post-install event collection up from 24 hours to 72 hours and enabling D3 optimizations
Tracking multiple iOS KPIs instead of only one in SKAN
Measuring sequential events in the conversion funnel
Marrying SKAN data to AppsFlyer attribution
Why use a model like this?
Our industry expertise comes from managing over $3.5 billion in creative and paid social spend for the world’s largest mobile apps and performance advertisers. We run our tests using our software AdRules via Facebook, Google, and TikTok APIs. Our Media Buying Model systematizes the UA campaign process, so we know what works, why it works, how to do more of it, and how to easily communicate status. Our process is designed to save time and money by optimizing quickly to reduce non-converting spend and to scale as pockets of efficiency are uncovered.
Below, see our Media Buying Model built out for sample mobile app campaigns across Facebook Android, Facebook iOS SKAN, Google iOS SKAN, and TikTok iOS and Android.
Facebook Android Media Buying Model
On Facebook, UA campaign goals may include:
High scale AAA campaign in top-performing countries
Broad targeting split by geo, using CBO to auto-optimize with additional ROAS boost from the top-performing demo.
Split broad targeting by time zone, using CBO to auto-optimize.
High Performing LAL audiences based on Primary Metric Value, using CBO to auto-optimize.
Exploratory spend split by interest groups, using CBO to auto-optimize.
Benefits of Testing on Android
Android unimpacted by IDFA
Optimization maintains deterministic efficiency
Android Facebook primary for A/B creative and audience testing
Rollout Android Facebook winners to iOS and other platforms
Campaign Strategies
Scale: increase installs
Exploratory: test creative, audiences to feed scale
Interests: bridge volume of broad and precision of lookalikes
Audience Strategy
CBO structure allows for maximized testing/learning
The highest-performing ad sets are relaunched as standalone campaigns to increase scale and performance
Initial 3% Lookalike likely to drive the best performance
High-performing LALs are immediately scaled as new campaigns
High-performing audience seeds are recreated with Frequency parameters
Use FB activity to create Lookalike Audiences (ex: Page Engagement, IG Engagement, Video Views, App Value-Based Lookalikes)
Purchase: Last 180 days
Frequent app users: Last 90 Days
Interest Group Testing
Build interest clusters using contextual targeting best practices leveraging personas, likes, pages, competitive apps, etc.
Ongoing identification and testing of iterative Interest Groups as campaigns progress
Creative
Utilize top creative combinations – image/video + body copy, headline, CTA
Creative Format testing- DCO, Carousel, PAC
Ad Copy Testing
Creative Testing
Phased creative testing, conducted on Android with winners transferred to iOS campaigns
Facebook iOS Post-IDFA Media Buying Model
IDFA Compliance
Embrace SKAN limitations: 9 campaigns max, 5 ad sets per campaign max, max 45-60 permutations
Optimize account to achieve a minimum of 128 conversions (installs) per campaign per day
Campaign Strategies
Scale: drive volume + performance
Exploratory: Test VO vs. AEO and Broad vs. Top Demos with single vs. bundled Geos to identify highest-performing Optimization/Geo/Audience (lowest CPT cost per trial)
Creative
Move winning creative from Android
AAA most successful with groups of high performing creative and copy
Scale
VO based on $CPT insights from Exploratory Campaigns
Initial AAA campaigns segregated by Geo can bundle US/CA/UK to reduce SKAN campaign slots (only if needed)
Campaigns 1-2-3 budgets must be sufficient to support a minimum of 128 installs/day
Exploratory
Leverage CBO structure in all campaigns to test individual/bundled Geos within single campaigns
Test Broad vs. Top Demo in campaigns 5, 6
Test AEO vs VO in campaigns 4, 5
Pinpoint opportunity for volume and $CPT efficiency by testing low-CPM images vs. video
Measurement Limitations for iOS Campaigns
Pre-IDFA Loss, iOS < 14.5
Lifetime deterministic tracking provided in AppsFlyer
28 days of attribution across Facebook, Google, Snap, and Tiktok for bid optimization and creative testing
Measurement Post-IDFA Loss: iOS 14.5+ Limits
User is anonymized; install and event reporting delayed 24+ hours
Limited to a single conversion value; only one KPI can be reported back to your ad campaign
Limited to 24 hours post-install for event attribution timeframe
Event reporting is triggered after a minimum of 24 hours of inactivity
SKAN provides 6 bits of information to hold your conversion event data
This conversion value is set each time a user triggers specific events in your app, like a purchase
Each time you set it, a 24-hour timer starts, and at the end of that timer, your conversion will be reported back to the ad network with a random delay buffer added
Each time you set an event, the 24-hour timer restarts, potentially delaying your reporting to 64 days post-install!
Google iOS SKAN and Android Media Buying Model
On Google, UA campaign goals are progressive:
Identify primary event performance and establish a baseline for video creative
Test messaging with upper-funnel campaign type
Event testing with a creative baseline established by geo
Continue message testing refinement
Full expansion by platform with top CPA event and performance messaging determined
Ramp up top event campaign from the previous week
Revenue optimization if FB enabled
Exploratory, Expansion, and Scale Campaigns:
Learning > Scale
Single Event CPA, graduated to event testing by Week 2
All Purchasers Last 180 days
Event Testing and Consolidation
Supplement opening creative tests with Install + campaign
Messaging testing by ad group splits for top volume CPA campaign.
TikTok iOS and Android Media Buying Model
Behavior Audiences, Interest Categories, Interest Keywords: Identify audiences/strategies to feed scale campaigns. Bridge the volume of a broad audience and the precision of a LAL.
Lookalikes, Time Zone Targeting, Broad Top Demo: Increase KPI performance
On TikTok, UA campaign goals may include:
Targeting split by behavior, using CBO to auto-optimize
Split targeting by TikTok Category segments, using CBO to auto-optimize
Targeting split by TikTok Interest keywords, using CBO to auto-optimize
Primary Metric custom LAL audience based on historical data
LAL audiences of an app activity metric, installs, trials, etc.
LAL audiences of an ad metric, views, clicks, etc.
Broad targeting split by time zone, using CBO to auto-optimize; additional ROAS boost from the top-performing demo
Scale
Increase user base with Broad low CPM campaigns; identify top Geo
Testing of US, CA, GB Geos separately with broad campaigns; CA and GB inventory can be limited on TikTok
New accounts must run with an MAI objective until deeper funnel metrics are unlocked
Due to limitations of SKAdNetwork API, there is a limit of 11 active campaigns and 1 ad group per campaign for iOS 14+
Behavior Audiences
Testing of video and creator interaction behaviors
Interest Categories
TikTok-specific interest-categories with large scale
In today’s post, we share Black Friday 2021 and holiday mobile app advertising best practices and insights:
Expect to see CPM increases of 30-40% between Black Friday and Christmas across social channels.
Non-eCommerce advertisers should consider reducing spend from Thanksgiving until December 26, 2021, and then accelerate into January to take advantage of CPM drops.
Bulk up on creative production and testing to have enough high-performing assets for late December spend increases.
User acquisition in mobile app advertising is always fiercely competitive during the holiday season. However, last year UA managers could reliably build LTV models and scale profitable iOS spend using lookalike audience targeting. But with the loss of IDFA, mobile advertisers hoping to succeed in the Black Friday 2021 fray are facing a uniquely challenging holiday season. The devastating impact of IDFA loss and the erosion of lookalike audience targeting has affected revenue across the mobile app industry and the holidays won’t be any easier. Additionally, the normal CPM drops that happen on December 26th didn’t happen in 2020 mostly due to advertisers maintaining spend to get ahead of then-pending IDFA removal.
CPM Trends for Mobile Apps in the U.S. (Optimized for Installs)
Perspective on the mobile advertising ecosystem
The Wall Street Journal recently highlighted how the loss of IDFA has impacted ad networks differently in Q3 2021: “Google, the world’s largest digital-ad company by revenue, tallied its highest sales growth in more than a decade in the third quarter.” Other social ad networks were negatively impacted by IDFA loss, supply chain disruption, and labor shortages. A dozen eCommerce companies interviewed by WSJ reported they now must spend a lot more money on ads to get the same number of sales prior to IDFA loss. Without enough data to know how effective ads were at driving purchases, many eCommerce companies reduced their ad spending. In a July poll of 118 e-commerce store owners by eCommerce Fuel, 62% said they had decreased their Facebook ad spending since the loss of IDFA.
UA and Creative Best Practices for Black Friday 2021 and Beyond
To supplement our Q4 Creative Best Practices for Facebook, Google, and TikTok, we bring you Consumer Acquisition’s Guide to Post-IDFA Holiday UA. Based on our experience managing over $3 billion in creative and social ad spend, we are sharing insights on mobile ad trends to maintain advertising efficiency through the performance peaks and valleys of the holiday season, including Black Friday 2021.
Riding the Q4 2021 CPM waves
Since 2019 we’ve seen a decrease in CPMs right before mid-November. With eCommerce and brand advertisers reserving their budgets for Black Friday 2021, there is less competition causing CPMs to go down right before the holiday burst. This year, the decrease may be more extreme because the advertising ecosystem is impacted by IDFA loss.
We consistently see CPM increases of 30-40% between Black Friday and Christmas. CPMs then decline immediately after Christmas and typically stay lower through the middle of January, marking the lowest time of the year. With eCommerce advertisers putting major budgets behind holiday retail, most non-eCommerce advertisers can gain efficiency by reducing their spend until after Christmas and then accelerating into January.
After gifts have been exchanged, many consumers turn on new phones and load mobile games and apps. As retail and eCommerce pull back on their marketing budgets, other mobile app advertisers can take advantage of what we dubbed as Q5 last year. Q5 referred to the 10-day period starting on December 26th and running through about January 10th. We recommend gaming, entertainment streaming apps, meditation and fitness apps, DTC, and others to bulk up on creative production and testing to have enough high-performing assets to take advantage of the CPM drops during this time. After Christmas is a great time to target new device users, and device-specific creative can result in an extra relevance bump. If you’re going to spend money in December and you’re not an eCommerce company, try to save your spend for the last week of the year.
Mobile Traffic Replacing Foot Traffic
Last year due to COVID-19, foot traffic to stores was down 33% from 2019. This accelerated a move to online advertising for retail businesses during the holidays. We saw eCommerce brands advertising as long as possible on Facebook and Google during the holiday shopping season to make up for the loss of foot traffic. This year, while brick-and-mortar stores may have more foot traffic than 2020, predictions are still 10-15% lower than 2019. Therefore, we expect increased interest in mobile advertising to persist across categories. First-time eCommerce spenders who successfully entered the mobile advertising ecosystem last holiday season will likely participate again this year.
“It’s well established that mobile social media is vital for product discovery,” says Vincent DeSantis, director of Retail Facebook Business Group. “And best-in-class retailers have learned that their online shopping experience must be, well, experiential. They’ve taken the “wow” factor from their stores and brought it to life in their customers’ mobile feeds.”
WPP, the world’s largest advertising group, lifted their sales forecast for the third time this year, based on strong advertiser demand in Q3. Another sign of a robust holiday advertising season, advertisers want to capitalize on the global economic recovery from the pandemic. This past August, WPP reported they had reached 2019 business levels a year ahead of plan. Chief Executive Mark Read said the uplift was well beyond cyclical recovery from the pandemic, giving them “confidence that there’s momentum in the business.”
Staycations
While the U.S. travel industry is showing some signs of recovery, American travelers are choosing houses over hotels, and local adventures over international destinations. This poses an additional opportunity for mobile app advertisers to reach millions of people staying in or staying home. Gaming, entertainment, health, and fitness can all enhance time at home. Similarly, people staying home turn to shared experiences on social sites like Facebook, Google, Snap, and TikTok. We expect social platforms that offer a way to play and engage with friends and family will continue to surge.
Bundling Up
As the cost to acquire a user/customer rises due to CPM increases and loss of targeting and measurement, advertisers can preserve profits by raising that acquired user’s value. Bundles, premium features, and tiered spending discounts (spend $X to get a percentage off) are all ways to increase average order value. Fortunately, this behavior maps perfectly to Q4 consumer activities. People are already spending more, both on themselves and others.
Fortunately, advertisers with Android apps who are NOT using Facebook’s AAA algorithm can follow our A/B testing best practices and maintain their deterministic efficiency. Advertisers maintain the ability to A/B test and see results at the individual asset level. Once a winning creative is identified, move it to iOS or other paid social platforms.
Getting Creative
Much of Google’s sales success in Q3 2021 came from the value of knowing a user’s intent: a search term reveals their interest or motivation. Other social networks that rely on app and web tracking are working through the complexity of losing deterministic targeting and measurement. Mobile advertisers that tailor ads to user motivations through persona-led ad creative, can scale efficiently and profitably by focusing on the positive attributes of contextual advertising while growing high-quality top-of-funnel installs.
Consumer Acquisition’s Ad Concept Model is designed to systematize creative development and UA targeting based on iterative testing. Our model ensures advertisers always have new creative concepts to stay ahead of creative fatigue. From niche to mainstream, our creative concepting model means our clients get reliable top-performing creative in the most cost-efficient and scalable way. The model can help you:
Systematize creative concepting
Utilize user motivations to tailor ad creative
Use creative trends and user motivations to create defined paths for new ad concepts
Find the creative trends popular within specific categories
Why trust our recommendations?
Our market insights and creative expertise come from managing over $3 billion in creative and social ad spend for the world’s largest mobile apps and web-based performance advertisers. Since 2013 we’ve worked with Roblox, Glu Mobile, Disney, SuperHuman, Rovio, Jam City, Wooga, NBA, MLB, Ford, Sun Basket, Lion Studios, MobilityWare, and many others. We provide end-to-end creative and user acquisition services for mobile app marketers via performance-oriented creative storytelling, integrated UA, and creative optimization.