How Will Social Media Adapt to the Advertising Squeeze? As advertisers are looking to cut advertising spending, social media businesses like QYOU Media, Twitter, Snap and Microsoft are finding creative ways to amplify revenue.
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August 22, 2022 11:00 AM Eastern Daylight Time
ValueTheMarkets.com News Commentary - Total worldwide internet users numbered 5 billion in April 2022, with Statista data showing 4.65 billion people use social media as numbers continue to rise. But with advertising spending knocked lower, how are social media businesses adapting? This article discusses the issue with reference to Twitter (NASDAQ: TWTR), Snap (NYSE: SNAP), Microsoft (NASDAQ: MSFT) and QYOU Media (TSX: QYOU) (OTCQB: QYOUF).
QYOU Media (TSX: QYOU) (OTCQB: QYOUF) operates as a media company, producing and distributing content created by social media influencers, artists and digital content creators on television networks, satellite television, over-the-top media and mobile platforms.
The company also manages influencer marketing campaigns for major film studios and key household brands.
QYOU Media’s most recent earnings, which covered the three-month period ended 31 March, showed that the company had grown revenue by an astronomical increase of 2,410% against the same period 12 months prior.
The business expects that, even with advertising headwinds, each of the rest of its quarterly updates across the year ahead will show record revenues. That expectation comes as the company’s Chtrbox subsidiary, which is one of India’s leading creator-powered companies connecting brands and social media influencers, has announced the launch of a new division.
The ChtrSocial division will focus on helping brands multiply their social audiences with modern creative methods, including micro-videos and personalized brand storytelling. QYOU Media says the operation will offer cost effective and scalable solutions to community building for brands, allowing brands to become digital creators themselves.
It sounds like an attractive offering in an environment where many advertisers are cutting back on advertising spend, while also focusing more on social media. With QYOU Media’s wealth of experience in influencer marketing on-hand, ChtrSocial could be an exciting project.
Twitter (NASDAQ: TWTR), which was cofounded by Jack Dorsey, provides online social networking and microblogging service, offering users the ability to follow other users' activity, read and post tweets. It might be one of the planet’s major players when it comes to social media, but the business has had a rocky ride over recent months.
The company’s second quarter earnings saw average monetizable daily active usage rise by 16.6% on the same period in 2021. Even so, revenue dropped from $1.19bn to $1.18bn amid advertising headwinds.
However, the company also blamed the drop on instability associated with Elon Musk’s $44bn takeover bid.
In fact, Twitter is now suing the enigmatic South African billionaire in an effort to force him to follow through on the accepted bid.
Legal wrangling could hurt the business further, but Twitter is unlikely to let the matter drop as Musk’s bid, which equated to $54.20 per share, represents a premium on the current share value.
These difficulties may have contributed to the decision to increase the Twitter Blue service’s monthly price, which is climbing from $2.99 to $4.99 for new subscribers.
However, subscription and other revenue decreased in the company’s most recent quarter, falling by 27% to $101m. This decline, coupled with the miniscule contribution from subscription revenue compared to ad revenue, calls into question the company’s capacity to deal with slowing ad revenues.
With advertising revenue likely to dip, other industry peers also seem to be on the lookout for new or enhanced revenue streams.
Snap (NYSE: SNAP) is one company trying out the subscription model for size. The business provides technology and social media services, developing mobile camera application products and services that allow users to send and receive photos, drawings, text and videos.
The company, which runs the Snapchat platform, has changed its executive team amid advertising troubles but is having some success with new monetization efforts. The business is offering users a ‘premium’ service in the form of Snapchat+, available for $3.99 a month.
It has seen some success, with Snap confirming that it had brought in more than 1 million subscribers less than six weeks after launch.
Even without the potentially major impact of this subscription service, Snap reported revenue growth of 13% in its most recent earnings update. In its current state, this contribution is minor compared to the company’s overall revenue of more than $1bn in its second quarter, but the company will be hoping it is the springboard to further growth.
CEO Evan Spiegel has hinted there could be further changes, stating the company is aiming to cultivate “new sources of revenue to help diversify our topline growth”.
But when it comes to social media subscriptions, there is one offering which leads the way.
Headed by Satya Nadella, Microsoft (NASDAQ: MSFT) offers applications, extra cloud storage, and advanced security solutions, serving customers worldwide. It might not be the first company you associate with social media, but the software giant’s business networking oriented social media offering, LinkedIn, looks to have been going from strength to strength.
Microsoft acquired LinkedIn for $26.2bn in 2016, with the aim to grow the site and integrate software such as Office 365. Since then, it has achieved significant growth and become something of a money spinner.
In the company’s most recent earnings, which covered the three-month period ended 30 June 2022, LinkedIn revenue jumped by 26% compared to the same period a year prior. This increase came even as Microsoft’s platform was impacted by a general downturn in advertising spend.
The company has long operated a premium subscription service for users, which allows them to access in-depth statistics about their profiles, better visibility in messaging and access to training courses.
Microsoft is also pushing ahead with integration of LinkedIn with its huge library of software applications, with one of the latest updates including integration with video chat software Teams.
The software giant will be hoping that its multiple revenue streams and powerful synergy with other applications will mean that LinkedIn can continue to rake in the revenue despite an advertising slowdown.
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