Some clear answers regarding the second-quarter revenue report of dominant ad-supported online companies start to appear as Wall Street tried to investigate the impact of Apple’s privacy changes on companies like Snap and Facebook.
Twitter and Snap would be the first of the leading ad-supported online businesses to submit earnings on Thursday, while Facebook, Amazon, Pinterest, and Alphabet’s Google will do the same next week.
The internet ad sector has seen massive growth in recent quarters, as people used to stay at home and do e-commerce, that has benefited the online ad businesses.
Though Apple Changes would give more primacy to users over controlling the apps that want to track them for advertising, market analysts still say the growth will keep continuing this quarter.
“Internet advertising brands should remain strongly profitable, as we’ve seen in the past few quarters, said Bernstein analysts in a note.
The new pockets of ad spend in travel, financial services, and B2B are likely to replace spend from verticals with mitigating user interest in media, games, and retail. This will be a permeable advantage for digital ads, according to analysts.
Bernstein’s analysts describe that the reduced targeting capabilities and less confidence in reported revenue on ad spend could drive more ad spend in Google’s Android than IOS.
Nonetheless, there’s a convincing push that those factors may not issue much.
Advertisers in a survey by Wedbush, an investment firm in Los Angeles, seem to experience an impact on their earnings from Apple’s privacy changes. This indicates that advertisers are reallocating finances and scattering to other platforms.
“As Apple’s changes challenging the digital ad industry, Facebook and Google still dominate and are frequently the platforms-of-choice for advertisers,” Wedbush analysts wrote. “Google search, Google Shopping, Facebook, and Instagram were ranked most regularly as the principal platforms in terms of advertising spend.”
However, analysts also spoke about the impact of these adjustments, which began to roll out during April. According to them, changes could together blow in the third quarter for these businesses.
Here’s what else to look forward to when the major online ad companies report their earnings.
Bernstein’s analysts said Twitter will likely sidestep many of the ongoing concerns over ad targeting, as roughly 85% of its ad income comes from brand ad spend.
The company is expected to deliver income guidance at the top of its peer group.
Twitter stays a prime pick for J.P. Morgan analysts because of its constant ad earning acceleration, convincing engagement with product advancements in areas like “topic” and its arrangement of revenue products. They also said the company’s enhanced pace of development velocity, activist pressure, and innovation bring “operational discipline.”
The Industry study implies the digital ad market remains solid, an even encouraging sign for an already growing digital economy.
Twitter has been believed to have benefit from the returns of launches and events, growth in MAP advertisers (such as in sports betting, investing, and crypto), and brand advertising ramping.
Bank of America analysts see Twitter’s Map a great prospect for the company. They considered Olympic will be a revenue producer in the third quarter. Meanwhile, Apple’s IDFA (The Identifier for Advertisers) can prove a superior headwind during the third quarter than in the second.
Snap
Bank of America analysts predicted roughly $845 revenue for Snap in the second quarter. It is up about 86% year-over-year, above management guidance and in accordance with street approximates. The analysts articulated that deceleration can be a sentiment headwind for the coming third quarter, in part because of tricky comps and an anticipated resilient impact from Apple’s policy changes.
“There remain some big concerns over guidance as a slugging retail ad spend market possibly continue to be equalized by classically solid back-to-back ad spend seasons and persistent brand spend ramp for Snapchat,” wrote Bernstein analysts.
“Although investors showing much excitement around monetizing Maps and Spotlights, we’re taking a bit of caution and do not expect much profit contribution from those platforms soon,” Bernstein analysts said.
J.P. Morgan analysts considered IOS 14.5 a worry, but they also believe that well-settled platforms are managing through. They see upside to the high end of earnings guidance of 80-85%.
Analysts from Jefferies underestimate analysts’ second-quarter earnings predictions, claiming these are too conservative since ad demand from formerly depressed verticals (like movies or travel) has surpassed expectations. They also said that their ad check found no materially impacted budgets due to IOS 14 privacy headwinds.
Morgan Stanley analysts also conveyed a similarly unbothered statement about the impact of IOS 14, saying that though there will be some near-future “bumps,” they will be “completely manageable.” They estimated 54% ad revenue expansion in the second quarter, 4% higher than the street estimates.
Last week, Evercore ISI analysts pointed in a note that they see a likely 49% consensus revenue growth year-over-year in the quarter as largely conservative.
“It remains imprecise how this change has impacted overall ad spend across Facebook and Google, but we’re sure the update has been immaterial to the date,” analysts wrote.
Bernstein’s analysts declare constant recovery in travel and faster return of Google Maps as the leading factors behind Google expected sequential growth. They said these factors have the potential to offset any softness in retail-associated searches.
YouTube is believed to get benefited from brand spend linked to Connected TV. The Network profit is likely to witness another remarkable quarter, piloted by an ad dollar movement from IOS to Android, according to the analysts. However, they believed these gains will be short-term.
Analysts from Evercore forecast $57.1 billion in earnings, which is a bit more than street estimates. According to them, strength has been persisted in online ad demand.
“We think Google’s strong positioning in Local (i.e., physical stores) and exposure to travel will generate tailwinds for ad income growth under a reopening situation,” Evercore analysts wrote.
Amazon
Bernstein’s analysts evaluated that Amazon will receive a 70% year-by-year increase in the second quarter. A shift from image to video ads is going to benefit Amazon, as it’s expected to translate into bigger priced and more successful ad units, according to analysts.
The win to NFL rights and the MGM deal will amplify Amazon’s opportunity in AVOD and diversify its advertising spectrum, analysts said.
An expected 73% second-quarter ad revenue growth has been anticipated by Evercore. They referred to Jounce Media, who’s imaging Amazon’s closed-loop attribution model as a key expansion driver for the company.
Privacy-related changes from Google and Apple may impact the advertisers’ ability to target ads the way they do, but, Amazon can handle this scenario as it maintains a solid first-party relationship with its users. It can offer marketers relatively rich data than they could get on other platforms. That might position Amazon desirably ahead in the third quarter.
An estimated $559 million in revenue in the second quarter is forecasted for Pinterest by Evercore analysts. This is up 105% year-over-year, a bit lower than street quotations and in accordance with the guidance.
Meanwhile, analysts did convey a note that investors will be cautiously watching what earnings guidance looks like in respect of a retail-heavy platform.
“We look ahead to management to put their efforts and commentary into the company’s chances to move further down-funnel and have the BUY button for users to transact on the platform,” analysts said.
