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FORUM TRANSCRIPT

Digital & Social Media Advertising – Q4 2021 Update – 19 October 2021

  • Public Equity
  • TMT
  • Global
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Specialist

CEO, President & Chief Marketing Officer at Fuel Online Inc

Agenda

  • Social media advertising overview, highlighting developments and trends
  • Potential Q4 2021 demand and pricing dynamics, and impact of return of in-person holiday shopping on related advertising spending and allocations
  • Positioning and performance across Google (NASDAQ: GOOGL) and its subsidiary YouTube, Facebook (NASDAQ: FB) and its subsidiary Instagram, Twitter (NYSE: TWTR), Snapchat (NYSE: SNAP), TikTok, Pinterest (NYSE: PINS) and Nextdoor
  • Outlook for Q4 2021 and into 2022

Questions

Transcript

1.
Could you discuss Q3 2021 spending growth in digital and social media advertising? What are your thoughts on the growth in Q3 2021 vs Q3 2020? Obviously there have been coronavirus impacts. What about vs Q2 2021, acknowledging that Q2 and Q3 are typically impacted by seasonal influences?

SP (Specialist): I think what we’re seeing, as far as the large influx in spending QoQ, is not necessarily what we would call authentic or traditional, as far as prior growth patterns. I think it’s a lot of companies trying to regain some of their market share and make up for lost revenue during the pandemic and the COVID event. There have been some really interesting things happening with different platforms coming to the forefront in adoption and ROI vs what they used to be as well. We’re seeing a lot of changes, as companies come back online with their marketing spend and agencies also deciding where to put their clients’ money and what are the most effective, cost-effective not only platforms but products too, because a lot of these social media platforms have launched or are in the process of launching new products, not only for additional eyeballs but because also some of the more traditional prior ad methods are burning out and getting a little stagnant as far as engagement goes.

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2.
What are your thoughts on metrics such as absolute spending growth, pricing related to CPMs [cost per milles], ad volumes, ad loads and ROI over Q2 and Q3 2021?

SP: It’s been really interesting, because while there are additional dollars being spent on all the social media platforms the last couple of quarters, the growth and new user base has not necessarily been there for certain platforms, such as Facebook for example. While more money is being spent on those platforms, without additional eyeballs it makes it a more competitive and expensive landscape, especially when you consider the auction-style system that is in place for a lot of those ads. As an agency, one of the things we try to do for our clients is identify really cost-effective opportunities that are not yet being embraced fully by the market and being less competitive, there’s more inventory and cheaper CPM, CPC or conversions on that front. One of the things that we’ve seen is Facebook become kind of stagnant in that respect, not a lot of new eyeballs, but a lot of people trying to dump money into it ad-wise, because that’s what they’re used to. That’s been the go-to for companies directly managing their spend and even agencies, whereas we’re seeing some of our best ROI on platforms like Instagram, which has the absolute highest engagement and engagement growth of any platform right now.

There are some other platforms that we have typically stayed away from, largely, not entirely but largely, just due to the age demographic and our clients and their target demographics, such as TikTok and Snapchat and things like that. We’ve never been a really big fan of spending on Snapchat, just because the ROI hasn’t been there and it was an extremely young audience base. Interestingly enough, TikTok has experienced about 20% growth through I guess what we’ll call post-COVID, where people are trying to get back to life and regenerate the economy. TikTok is up almost 20% and there have been some very interesting opportunities there for advertising and marketing. Still, depending on what your demographic is, whether it’s men, women, what age bracket and what region, Instagram still is probably one of the most rock-solid go-to places to spend your money as a direct company spending or an agency.

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3.
Coronavirus hit around 19 months ago in the US in mid-March 2021. Do you think advertising and marketing has recovered or is there a hangover? You mentioned the notion of people in the industry trying to catch up.

SP: There are a lot of interesting factors at play, whether it be companies trying to regain market share or pivot or launch new products or try something new or having to hit certain numbers for shareholders and things like that. I think a lot of the Q2-Q3 data that we’ve seen or are seeing isn’t authentic and may not stay the course, as things begin to normalise into 2022. We’ll see what happens there, but there are a lot of interesting things going on and new products, marketing products, also being offered by some of these platforms as well. People are wanting to test them and try them out. I want to go back to, real quick, you had circled back to my mention of TikTok being up as far as adoption and people spending marketing dollars there. I want to let everyone know and understand why and how stuff like that happens. Kids are usually, the kid demographic, they are almost always the early adopters. They’re always the first ones typically to a platform and then it takes the older crowd time to assess and decide if it’s something they want to be involved with or adopt. As we know, kids flocked to TikTok and Snapchat and I think the winner in the adult segment, as far as, “We’re willing to check this out or try adopting it,” wound up being TikTok, largely because of the need for entertainment at a more mature level than what is existing on Snapchat as far as content.

As people get back to work and the world gets back to normal, as an agency, on the agency side, we wonder if that’s going to be sustainable, people’s need or desire for constant entertainment, because people are going to be preoccupied getting back to work. We’ll see if it sustains, but it’ll be really interesting to watch. That’s why that’s existing. That being said, it’s also the reason why YouTube is absolutely killing it and is I think the second most trafficked site and second most popular, popular used in a sense search engine when people are looking for content. Video marketing is probably one of the fastest and hottest growing marketing segments in that respect, so you definitely need to include YouTube growth in that discussion as well. One of the losers in all of this, in our opinion, is Twitter. Twitter has been on a downward trend as far as adoption and engagement. They’ve been grasping at straws. Fleets was a failure. While they’re touting increased marketing dollars, you have to look at where those marketing dollars are coming from and what countries they’re in, because the value of Twitter users in other countries pales in comparison to Twitter users in the United States and where that marketing money is coming from. We typically, as an agency, don’t like to put our clients into Twitter advertising, the ROI just hasn’t been there. It tends to be a fairly toxic environment and just hasn’t really been that successful in that respect.

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4.
Could you outline some of the core industry KPIs? How would you compare Q3 to Q2 2021 growth? What about your expectations for Q4 vs Q3 2021? Could growth be consistent? Has it decelerated, in part because there have been some difficult comparisons? How would you characterise the tenor of overall spending from Q2 to Q4 2021?

SP: It’s uncharted territory and that’s a crazy thing. Like I said, I’ve been in this business for well over 20 years and the spending and adoption and different tactics and things that people are trying to do as far as spending their marketing dollars today have never really been seen before, because you have a combination of not just traditional marketing but new companies to market, new products to market, people trying to regain market share, people trying to recover lost revenue. What has happened between Q1, Q2, Q3 and Q4, or potentially is going to happen in Q4, is we’re going to see a combination of a little bit of all of that. We’re going to see some people who are business as usual and just do what they’re doing and, “We spend X during Q1, Q2, Q3, our marketing budget is allocated as such and we drop the hammer on Q4 and spend to the moon because that’s our audience and that’s where we make 70% of our revenue.” You’re also seeing an influx of companies saying, “We have downsized, we’re not spending as much on overhead and commercial space and we got some PPP money that we haven’t spent yet, let’s try this. Let’s try ads, we haven’t done ads before,” typically, or, “Let’s open up to new markets,” and things like that. I think what we’re seeing is just absolutely uncharted territory and very hard to predict.

I think we are going to see an increase in Q4 spending as usual, we always do and always have. Whether it’s 50% more or 100% more than what we typically see is going to be really hard to say. One of the other things to take into consideration is the whole supply chain issue that’s going on now and what are people going to do with their marketing dollars and are they predicting that they won’t even have the inventory to sell through on that marketing dollar? Will they shift or pivot to brand awareness marketing vs direct sales? It’s really hard to say. What we’ve seen kind of typically follows spending trends, but at a much greater level than I think we’ve seen before. I think, like I said, it’s a combination of all those different factors.

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5.
People are wondering how economies reopening and customers returning to stores has impacted e- commerce, which may not experience the same growth in Q4 2021 as it did over the previous few quarters. Q4 2020 provides a difficult YoY comparison for Q4 2021. Have you noticed indications that not as much spending is being allocated in and around e-commerce?

SP: It’s interesting, because I think it aligns itself. Retail vs online or e-commerce is interesting because I think it’s going to follow along the lines of what we saw with travel. As soon as people were free and felt safe enough to go out and travel, travel and hotels and airlines and whatever, Airbnbs, were through the roof. Everything was booked, slammed. I think retail is experiencing the same thing, where people are, I want to get out of my house, I want to go to a mall, I want to walk around and shop in person and feel and touch and see things, but I feel like it’s going to wear off and that convenience is going to come back and override that at some point, because we’re very much a convenience society. We’ll do whatever is fastest, easiest, quickest, the most painless experience to get the things that we need. People spent the entire pandemic ordering from Amazon and online sites because it’s what they had to do and they were burned out on that. When you first come out of it, it’s just like the travel. You’re going to go to stores. I’ve seen malls and stores and things packed retail-wise, but I think it’s going to fade away as people get burned out on it and prefer the experience of just what’s easiest and quickest and most convenient for them, which is always going to be e-commerce. I think we’re going to see the e-commerce come roaring back.

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6.
How might marketers and advertisers adjust for a potential a spike in people going shopping in person, especially ahead of and during the holiday shopping season? Do you think e-commerce will return to its previous peaks intra-quarter or could there be a gap before it resurges as your clients and others focus spend on the return of in-person shopping?

SP: I am by no means a retail expert, but I do believe, if I were to guess, that people are going to want to shop a little bit more in person this holiday season, just because it’s exciting and it’s fun and you get the holiday vibes, which you don’t really get when shopping online. I think the next Q1 will probably see e-commerce return to normal, if I were to guess. As far as people spending advertising dollars, I’m not sure that there are a lot of companies or agencies that are predicting this or understand what is happening, as far as retail vs e- commerce. I think they’re going to spend they way they typically spend, or maybe even spend more to be competitive and fight that ongoing battle. What they don’t realise is, they’re also competing for ad inventory and eyeballs and engagement against other people who are doing different things, like branding and new product and company launches and even companies who have a surplus of marketing dollars because they shut it all off during the pandemic and they’re just required to spend or meet certain targets. A lot of marketing departments, if they don’t spend their money on a particular calendar year or quarter, then they don’t get the same money the following quarter, so they may just spend just to spend as well. I think we’re still going to see the marketing spend Q4. I don’t know that it will be as successful, though, and convert as far as ROI the same way it has previously, because I do believe that we’re going to see people in stores and in malls for that in-person experience.

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7.
It seems there’s been a big bounce-back in pricing, by which I mean the cost of advertising. I think pricing fell off a cliff in March and April 2020 but has increased steadily. Has CPM pricing been trending higher, or has it been stable? Do you expect ad load oversupply?

SP: It has gone up and that’s exactly it. That’s what attributing to the revenue growth of some of these social platforms who don’t necessarily have user growth, is it’s a more competitive landscape now and people are spending more, not only in their traditional fashion to get conversions or get sales or drive traffic to their even mom-and-pop stores, but it’s also people trying to make up for lost time or spending surplus marketing money that wasn’t spent. Again, as far as ROI, I believe and we’ve been seeing that the cost per click and CPMs have gotten more expensive as it’s a more crowded landscape with more people trying to spend more money, but not necessarily more user inventory, so to speak, other than for example platforms like TikTok that had a pretty massive growth.

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8.
Companies may not have spent as much as anticipated across Q1-Q3 2021 – perhaps due to coronavirus uncertainty – meaning there would be more spend available in Q4 2021. How might such a spending environment and the additional demand that comes with increased budgets impact pricing? Could it be incremental 10% or 20% CPM gains? Would they be largely consistent? Does it depend on the properties?

SP: I’m not going to be able to give you the answer you want, but in a roundabout way, unfortunately, it really depends on the niche. Apparel is converting different than B2B. The beauty sector converts differently from education or employment or finances. Fitness absolutely kills it. Fitness and health and wellness is absolutely killing it as far as conversions, one of the highest-converting ad segments there is. Other industries are converting incredibly low, actually, such as the tech space or even the hospitality space, because it’s so competitive. It just really depends. I think it’s fair to say that, as far as a cost per conversion or even a cost per click, we’ve seen increases anywhere from 10% to 300%. It just really is industry-specific and platform-specific and demographic-specific.

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9.
Many expected the IDFA [Identifier for Advertisers] to have an impact as Apple announced and introduced it and as users started to adopt it. There hasn’t been much impact, though companies have signalled – perhaps conservatively – that they expect it in Q3 and Q4 2021. Have you noticed whether it has impacted key metrics such as adoption or how clients think about the platforms that they’re advertising with or the kinds of advertising that they’re engaging with?

SP: I don’t have a big, robust answer to that, but the only thing that I would say is we have not seen any difference or any change. The one thing I would tell you is that people have been shown, at this point they have been conditioned to their personal data and information being shared. I think I saw some statistics recently where over 65-70% of people polled on that could care less about their personal data and just accept it as a part of the social and online environment and getting the best experience and getting the most out of social platforms. People really do appreciate and like highly targeted ads. It’s actually one of the most interesting ways that people do new product discovery. It really does not seem to have impacted anything and we don’t really see it impacting anything, so far.

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10.
How would you characterise the Q4 2021 performance and positioning of platforms such as YouTube, Facebook, Instagram, Snapchat, TikTok and Pinterest? You mentioned early adopters typically come from the younger demographic and there seems to have been some crossover, particularly around TikTok. Instagram and YouTube remain strong. What specific properties might inform outlooks for Q4 2021 and into 2022?

SP: There are some really interesting things happening platform-wise and then it’s also growth areas, as far as digital consumption and where marketing dollars should be placed. You did mention Pinterest earlier and I want to say that they experienced some pretty good marketing growth recently, along with TikTok as well. Pinterest is a phenomenal platform. Its primary demographic, and what it’s best known for, is reaching women really successfully. The engagement levels there are pretty extraordinary and they’re very receptive to ads on that platform. It’s certainly a great platform in that respect. Instagram is probably one of my favourites as far as where we’re putting our clients. They’re innovating, they’re coming up with new products all the time, they’re really all about the creators, they’ve shifted away from being a photo sharing app and are trying to provide more value. That’s one of the things that our agency is really big on, is providing value to consumers. Any time you can create really high-value content that is shareable and gives something to people, we’re on board with that as far as consumption usage, investing in, creating social content and certainly placing marketing dollars.

As far as growth areas and what’s happening and looking forward, I think one of the hottest areas as far as marketing dollars that is still unsaturated is the digital music and radio category. I think we’re going to see some of these platforms really start to step into that, podcasts also. We’re starting to see some of the other platforms, other than YouTube, go to a little bit longer-form videos because video consumption and video ad conversion are pretty extraordinary right now. People have gone more to it, as far as a source of entertainment, over TV. TikTok is basically challenging YouTube with three-minute videos now. They’ve been testing it and it’s been very successful as far as what we know. Twitter has tried some similar things, but again, Twitter is a completely different demographic and people are very burnt out on it and it’s a very toxic environment. We’re seeing a lot of different things.

A lot of these companies are innovating. Like I said, Facebook has been very stagnant as far as their products and their adoption. Also, we’ve seen some really interesting things that weren’t necessarily the case before, as far as demographics using certain platforms. Women are taking over on Facebook, men are using it far less than they used to. Men have really burned out on Facebook, it seems, their engagement levels are very low. Same thing with Twitter, Twitter’s male engagement is dropping rapidly. It’s a really interesting conversation and you’ve got to start it off on a case-by-case basis and discuss who are you trying to reach, what platform has what strength and what weaknesses and what market have they captured. We’re seeing a lot of burn-out, especially in the male demographic, on these platforms.

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11.
What are your thoughts on the younger demographic and advertising around apps? There’s been interest and opportunity in using platforms such as Instagram, TikTok and Snapchat to advertise app purchases or purchases within apps. Do you and your clients spend any time thinking about this? To what extent is this driving growth for platforms that cater to the younger demographic?

SP: Yes, I think that’s fair to say. For example, and I wanted to circle back to Facebook is pretty much dead on arrival as far as younger demographic. We even do some of our own minor informal polls and stuff and it just seems that teenagers absolutely hate Facebook, but they love Instagram, they love TikTok, they love Snapchat and things like that. That is where we’re seeing a lot of app advertising and marketing happening, is on those platforms, because early adoption is an extremely powerful thing. Even if kids aren’t necessarily your target demo, if you want early adoption or you’re launching a new platform or a new app or a new concept, you definitely want to get in front of the younger audience, in that respect. We’re seeing a lot of app advertising on these platforms and instant activation direct to install on some of those click-throughs on those apps too. It’s pretty interesting what’s happening with that, because also these apps are extremely profitable, especially the games.

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12.
Some platforms – particularly TikTok – have used in-app advertising very successfully to come to prominence. How big do you think the market is for advertising for and around apps? I read an estimate that it could represent one-fifth of the global digital ad market, though that seems high. Do you think there is a sustainable level of growth there, given some of the changes put in place by Apple through the IDFA and ATT [App Tracking Transparency]?

SP: When you say in-app, are you talking about advertising other apps for download and access to and promoting them, or are you talking about actual marketing spend within random apps?

TB (Third Bridge): I’m talking about the spending that’s done in or related to apps such as app-related advertising. This could be paying for advertising that might encourage someone to download an app an or paying to promote new features and functionality that people can pay for within an app that they may already have.

SP: I think it’s an incredibly expensive landscape. I think that any app that’s new to market, anybody who has an idea for an app and they come out of beta or they’re doing beta and they’re launching their app, they have to market their app. They’re going to go and market their app on all the major platforms, social platforms, that exist. That’s the best way to market your app, other than advertising directly in App Store and stuff like that. The thing is, what we’re seeing, we’re not mobile experts per se but what we’re seeing as far as app installation is, people tend to burn out on having large amounts of apps and testing and trialling different apps. There’s some reluctance to people downloading and randomly trying untargeted apps and putting them on their phone, because they’re slowing down their devices and they take up large amounts of memory and bandwidth and also because of the privacy and security concerns that are constantly being discussed in the news. I think people are a little apprehensive to downloading just a random app that happens to show up in your feed advertising it now.

If it’s directly and highly targeted and let’s say you’re using a GPS app or something like that and then a newer, better one shows up and you might have some interest in it, that’s converting really well, or let’s say you put a particular type of role-playing game that’s military-themed and they’re able to capture that in demographic audience, they build audience targeting and stuff like that and they show you a very similar game but they tout that it costs less to participate, you may be successful in advertising that app. There is a lot of app burn-out and I think people are deleting unused apps off of their phone and are a little more apprehensive of randomly clicking on an add and installing an app. I think there’s a trust factor issue there as well. If it is highly related and highly targeted to your behaviour and what you use and what you like, it’s a very successful proposition, advertising your app on other platforms.

TB: Do you have any thoughts on the estimate I mentioned that 20% of the digital ad market is related to apps?

SP: That seems very high to me as well. I don’t know that I even necessarily buy that, based on what we’ve seen.

TB: Do you think around 10% of the overall mix being app-related is more realistic?

SP: That’s actually exactly the number that popped in my head. I would say it’s probably more like 10% of what we see on a daily basis. The other thing to take into consideration is there are so many apps that come to market on a daily basis by individuals or small teams. They don’t really have large marketing budgets, unless they’ve been funded or are part of a development tank or company. They may test or try advertising, hoping that their app will go viral or hit it big or get a write-up, but really they only have the staying power to advertise for maybe a month, maybe two months, maybe three, just depending on how much they’re spending. You’re not going to see a lot of that app advertising be sustainable either.

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13.
I think Pinterest benefited significantly from the nesting phenomenon that occurred as coronavirus hit, wherein people were baking banana bread and re-outfitting their homes through home décor and DIY projects. It seems the advent of summer 2021 and the economy’s reopening brought with it a behavioural change that impacted Pinterest. How do you think it is positioned now, considering user growth and engagement? Could it regain momentum? Can it pivot to catering more to people wanting to travel, stay at hotels and go to restaurants?

SP: It’s a really good question. One of the interesting things about the Pinterest growth during the pandemic is, like what you said, people were doing things that they had never done before with the nesting, the redecorating, the baking, the cooking, trying to occupy their time and try new things. Pinterest did experience some pretty decent growth, but what was really interesting is, they experienced growth in an age demographic or bracket that they had never really seen before. It’s typically a middle-age, 20-plus, 30-plus, 40-plus type demo and it saw some really wide adoption between the 12 and 25 range. They got a whole bunch of new, younger users who were just bored and wanted to bake or wanted to decorate their room or help mom and dad or do different things.

The question is, how long will those users stick? Will they continue to use the platform, now that their interests are changing and that they go run around and do things and hang out with friends and are in school and stuff like that? I don’t know the exact percentage of growth, but I do know that, in 2021, Pinterest had the greatest adoption between that bracket, that age bracket, than they had ever had before. You have to imagine that, as life gets back to normal, that is going to fade. It’s almost a guarantee, right? Kids, teenagers, early 20- somethings, they’re going to go out and be sociable and do things and they’re not going to nest as much or be baking as much or looking for decorating ideas and things like that quite as much. The question is, and I don’t have the answer to it, what percentage is going to stick. It could be 20%, it could be 30% of the growth that they had experienced, it could be 50%, it’s hard to say. People tend to be a creature of habit and when they start using a platform daily and they like it, they continue to use it. It’ll be really interesting to watch that. Pinterest is one of those platforms that experienced some very interesting growth, along with TikTok.

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14.
It seems Snapchat has continued to grow, innovate and succeed beyond what many anticipated. What are your thoughts on what it has accomplished, particularly given it seems increasingly to be the destination for a variety of different types of advertising and marketing solutions?

SP: We’ve always shied away from Snapchat, just because of the quality of the platform and the quality of the content that was being shared. While people use it as more of a messenger, so to speak, with the disappearing messages and things like that, there’s a lot of nefarious stuff that’s going on, even a lot of porn advertising and things like that on there. They certainly have experienced growth YoY and QoQ, but their demographic still is very young. We also saw something very interesting happen in 2021, which is they actually lost some market share, as far as the data and statistics that we saw, in the younger age bracket, that 12-24, 12-34 type age bracket. I think people are starting to burn out on the platform a little bit and don’t find it as interesting or as clever as it once was. Like I talked about on Twitter, the toxicity, there’s a lot of toxicity and negativity on Snapchat because people don’t feel that they’re held accountable for the things they post or share because they don’t permanently live there. It certainly presents advertising and marketing opportunities, depending on who your demographic is, and probably on the more inexpensive side, but we as an agency don’t typically tend to like to place people there or love it. It’ll continue to have some growth, but I feel like it’s going to hit a wall at some point.

TB: I think many would argue that Snapchat has innovated a lot around lenses and other new functionalities that have been used for marketing. People might also mention the content, channels and shows that it has rolled out. Do those not appeal to an agency such as yours and your clients, in part because it just seems overwhelming and there’s not staying power? Alternatively, does it always come back to the demographic conversation?

SP: It usually comes back to the demographic conversation, but also once a platform is known as something and for something, it tends to stick. Even though they’re trying to innovate and do things and roll out, kind of go away from what they’re known as, which is more of a conversational platform, direct-messaging type platform or content that is not evergreen, we’re about providing value and we really like content that tends to live and continue to provide value. We typically, even our social media strategies, don’t really like to do anything on Snapchat for our clients, because it’s typically not worth the effort and energy and planning and content on that side. You mentioned or touched on the leadership and things that they’ve created and brought to market, as far as camera lenses and filters and things like that and absolutely they were pioneers in that space and they created something incredible, but it’s nothing that none of the other platforms can’t do and aren’t doing. A lot of that has come to Instagram now as well and not much of it is proprietary. While they were first to market with that stuff, they’ve lost their stronghold on it.

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15.
You stated that Instagram is the platform that many of your clients use and succeed with. I think a key to the platform’s success is Stories, which embraces short-form video in multiple different ways. To what extent does that approach have staying power? You mentioned that Snapchat has innovated and then Instagram has taken that innovation and monetised it. Could that theme continue?

SP: I think Instagram has a really smart team behind it. I think they’re doing a lot of interesting things. I think that their approach is smart. They watch what other platforms do and see if things are successful or not, or people actually appreciate some of these features and things like that and then they capitalise on that or make it even better. Stories is absolutely huge. It feeds people’s need or desire for temporary content or thoughts or moments you want to share but don’t necessarily want to live forever, like the Snapchat concept, but the ability to do it via photo or video or even just text or via music and things like that. It’s been wildly successful. The ability, originally they rolled it out with the swipe up to go to a site or, “If you like this shirt, you can go here to buy it,” and a direct link to it. Now they’ve gone to what they call stickers, essentially, which is you can just straight up click on the link. It’s been wildly successful and it fills that void between Snapchat and Instagram, they kind of have both now.

They’re also starting to go more of the route of Facebook and YouTube as well, by really propping up and supporting and promoting creators and giving them tools and the ability to create and produce more things. The content is getting richer and longer and more interesting, the IGTV, things like that. Now they’re also doing things like showing people and showing users additional recommended content or topics that may interest them, so cross-promoting content. You can now really dive in and browse entire sectors and channels that might be of interest to you. There’s some really interesting content discovery ability on Instagram too, which wasn’t necessarily always the case. It used to be hashtag-focused and things like that, but now if you click on one particular video, let’s say it’s a Jeep off-roading, you’ll wind up seeing a whole stream of different channels and productions, whether it’s IGTV or Stories or posts, in that space if it interests you. It’s really interesting, it fits every content need and desire and gap. From a marketing perspective, you have all of the abilities of Facebook, as far as building audiences and targeting, pretty much that you would ever want as well. It’s really providing well for our advertisers.

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16.
I think Instagram Reels is becoming much more prominent and gaining many more users. Much of the content seems to be TikTok videos. People have said that 2021 is the year where TikTok needs to formulate a plan and start providing options for monetisation. Do you think it has made sufficient progress? I’ve heard mixed things about how it has invested and how it has executed. What are your thoughts about TikTok and the potential to turn it into an advertising business?

SP: I don’t really know what’s going on over there at TikTok. I don’t know what their innovation plan or road map is. I’m not really quite sure where they can go with what they have. What they have is really good and it fit the need for the desire of people to consume interesting or really cool or funny creative content. I even know that, during the pandemic, a huge amount of even teenagers were trying TikTok recipes. A lot of people were sharing these short-form how to do this, how to do this, try this. They have their own little market niche locked down, but I’m not really quite sure where they can go with it or how they can innovate further. TikTok is TikTok. It’s known as TikTok, it serves its purpose and it does what it does. I know that they’re rolling out live- streamed shopping and trying some shopping channels and some different things like that. They’re going to be held accountable to innovate and grow and try and launch new products and things like that. As far as what’s going to be successful over there, it’s really hard to say. The mere fact that people are sharing TikTok videos on Instagram goes to show you that Instagram right now can cover every content need and desire with whatever short-term, long-term, medium-term type content that you would want to consume.

TB: Could you say Instagram has almost become a super-app without the multiple-app aspects to it?

SP: Exactly.

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17.
What are your thoughts on Nextdoor? I think it’s in line to come public. Many people over the last 1.5-2 years seem to have had a renewed focus on and appreciation for their local environments and neighbourhoods, which might have put a spotlight more on Nextdoor. Could the platform be an opportunity for a global company to provide local advertising opportunities? This could be predominantly for medium and small businesses, but also increasingly enterprises wanting to reach out and connect with users interested in those things.

SP: Nextdoor is a very interesting platform. To be honest, we don’t do a lot with it. You can hyper-focus on neighbourhoods and specific locations and areas, which is very important, but you can again also do the same thing with location targeting on Facebook and Instagram. I know that Nextdoor, they have extremely rapid growth right now. I know that people are flocking there as far as advertising and they had a massive increase in advertising revenue this year. I think they grew 50-70%, something like that, I don’t have the exact number in front of me. I think that any time you see something rapidly growing and expanding adoption, it’s good to test there as a company or a marketing agency. It’s our job to identify cost-effective opportunities that fit your marketing needs. When there’s less adoption, typically your ROI is higher and the cost per view or cost per click or cost per conversion is going to be far lower, because there’s less ad competition. It’s certainly something that I would look at for local advertising, hyper-focused, hyper-targeted local advertising and it does have tremendous potential, for sure, and they’re on a growth tear.

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18.
Your comments on Nextdoor reminded me of what we discussed about how people are experimenting and trying many new platforms. It seems at the start of the pandemic, when everything was locked down, there was a renewed focus on back to basics, Google, Facebook and not really trying to experiment as much. Do you think people have shifted back to understanding that there are many different options to try? Do you expect that to continue for the foreseeable future?

SP: Yes, I most certainly do, but I think a large amount of that willingness to try different platforms and different methods and different ad formats than what you traditionally do or what has traditionally filled your funnel or works for you is really the current landscape of expense. You’re going to look for more cost-effective marketing solutions today, based on what spending is and how competitive it is right now. Something like this might be a gem. It might be a marketing gem, depending on if you own a chain of 10 local area pizza restaurants, it could double your business at half the price, who knows? I’m not saying that that’s the case, but it might be a marketing gem when every other single one of your pizza chain competitors are using only Facebook because that’s all they know about.

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19.
What’s your 1-3-year outlook for digital and social media advertising, highlighting themes, trends and specific companies that could merit attention?

SP: I think one of the interesting things about the pandemic was that it showed people that they could be creative and think outside the box and still produce content or even TV media and things like that from home at a very high level. I think we’re going to see a very large emergence over the next few years of home-grown digital media properties, whether it’s podcasts or actual legitimate TV shows and things, because we just witnessed major networks produce great content from people’s homes and bedrooms and garages. I think we’re going to see a lot more home-grown digital content, networks and platforms and things like that. I think a lot of companies and even agencies are realising, if they haven’t already, that there’s extraordinary value in things like, like I said, digital radio, podcasts, but also video. A lot of companies have not really gotten into the video advertising space. I think there’s a massive amount of consumption there. While people tend to tune out ads in whatever video or TV stream that they’re watching, you do typically have about a good 10 or 15 seconds to capture their attention. There’s a massive amount of inventory and a massive amount of hours being watched and a massive amount of eyeballs. I think you’re going to see a lot of companies go to producing really interesting, creative short video content that captures people’s attention.

The way that we like to do that as an agency is, we like to create value. We like to just teach people things, like DIY or facts or information and win people over with brand recognition and brand name and become a trusted source of information and value. I’ve been preaching this for the last 10 years, is provide value, provide value, provide value. We’re starting to see companies get it, that it’s not just market your company, not just market your product, but it’s win people over by providing value and being seen as a source of information and a resource. We’re going to see a lot of companies get into the production space, I believe. I think that’s going to be the trend. I think you’re going to see a lot of mid-size to larger companies even start their own little production facilities and studios, if they haven’t already.

TB: With that, will companies have to find a way to make people aware of what they’re doing and that’s where you would come in?

SP: That’s right, yes.

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