Google and YouTube Overdeliver, Fraud in CTV and the New California Privacy Rights Act | Nov 9, 2020
You know there's some interesting hypotheticals that you have to consider that if you know just purely hypothetically google was not allowed pay apple to be the default search iphone. I can't imagine them allowing microsoft or duck duck goad. Pay a significant amount of money to be the default searched. Hey gang is monday november ninth. I think that's right. I've lost track of the day ever since the beginning of the year. Nicole erik and listeners. Welcome to the conversation that covers all the digital media advertising and technology news just buying them. Daily emarketer podcast. I'm executive producer. Marcus johnson. i'm joined by onto google experts. We have with us. Principal analyst nicole perrin -tising and technology kelo hanikos. Rosa joined fi. Eric hagstrom who is one of our forecasting analysts. Thanks for having me hey. Today's topic google's q three earnings. My goodness how. Google do in july august and september is what we hope to answer on this episode. We're going to go. Kind of line is and bylines and to some extent only four line items of four or five kind of main ways. The google breaks out their performance over. Each quarter will talk some google advertising. Google search youtube google network members properties as. Well let's start a top a quick mention about total revenues or total alphabet revenue one of the headline them. As you might have been hearing is forty. Six billion dollars. That's for alphabets. Which is the umbrella comparing company so forty six billion. Q3 up fourteen percents on q. Three versus the twenty percents loss q. Three so decently as as expected to that growth is going to take down each year in keeping with what we'd expect in q two of this year total revenue had fallen negative one point seven so it climbed out of the hole that it was in from las quarter. That's toews alphabet revenue. But if we dig a little deeper into google advertising specifically google advertising more what we care about was thirty seven billion up nine percent year on year which means this is google ad. Revenue has gone ten percent. Q one negative you to a nine percents in q. Three so ten negative nine so a shaped recovery in deeds nicole stone with you your thoughts on how google advertising getting q. Three well it did pretty well. It did a little bit better than we expected it to do. And in that it had a lot in common with all of the other major tech platforms that reported ad revenues in q. Three so far the ad market recovery has been very strong in q. Three and i think it looks like we should expect a really strong end to the year as well I'm just to clarify you. Know she's talking about the digital ad market. Some of what we've been seeing is that there's been a lot of weakness in the tv ad market in some of that is potentially going over to digital platforms I looked at the nine months ending. September in twenty twenty number so if the nine months that we've had this year already in the books google ad revenue was up four percent versus the same nine month period last year. So that's that's pretty decent. You take a nine months. Twenty twenty vessels the same nine months. Twenty nine teen is up four percents. That's slow though compared to if you look twenty. Eighteen vessels nineteen for those nine months. Last year was sixteen percent growth. So you could look at that and say what is four times less growth this year than they realize. Last year you could also cited as a pandemic an economic recession and they still up four points google's ad revenue. I did notice a accounts for eighty percent of alphabet. Total which is down four points from last year. So the shad that google makes up. It's still overwhelmingly the most amount money that they make us from advertising but it is ticking down any thoughts about that guys is it. Google say anything with regards to how much is investing in other areas. Or is this telling because you can only gross folles especially when you're so big well other lines other than advertising having growing as well most notably their cloud business as well as subscriptions from youtube mainly youtube. Tv and youtube but the ad businesses recovered like very very strongly. As you've said we've been through a global pandemic a major recession. I think youtube is worst economic quarter since the great depression and they've recovered and they've they're still positive on the year. Which in my mind when you started talking about an advertising business that's supposed to be very cyclical tied to the economy. That's really nothing short of incredible Yeah as you mentioned. Google cloud revenue up forty four percents hitting three billion for the courts. Let's talk some such google search and other folks listening. What's other so this would be advertising on any owned and operated properties. That are not youtube. So google search advertising on g mail advertising on maps advertising on any other google properties. Okay google search and other is explains twenty six billion up six percent again seeing another v shaped recovery. Any thoughts on how google did here also. This was the place where we expected. Google to have the most trouble this year for a pretty simple reason which is a large share. Google search comes from travel advertisers. A lot of travel. Advertisers budget goes to google search these advertisers that really dramatically cut spending earlier in the pandemic. For obvious reasons. They just weren't able to do business in large part still aren't doing very much business. You know business just way down from where it was so much less advertising in to the extent that they are advertising. They're spending less money. And we knew that would really hurt. Google search revenues but some of the other verticals that advertising google search ended up doing this part of their business even better than we expected especially ecommerce advertisers which are pretty active in google search. And i think what's interesting. Is that ecommerce. Spending their has held up even as it's also gone really strongly to some other venues like amazon. And that's the interesting thing i mean. When we were in the midst of the early parts of the pandemic in april we made this forecast and we were expecting that a google would actually be negative on the year because of that loss from travel and we were going off under the assumption that e commerce in some of these other businesses that have benefited from the pandemic wouldn't significantly increase or add budgets. What's happened is that these guys have significantly increase or ad budgets and had been not. Just google positive. You're on your but also facebook Snapchat so there's just really broad based strength in advertising coming from e commerce sellers. We're expecting that to continue. I mean we saw as you mentioned a spike and ecommerce especially as a share of total retail and spoke to retail folks about this andrew. This man's in the daniel keyes is that watermark. Hold up you know. Are we going to see that. Share of ecommerce drp a bit when people can go back to the stores. I guess. I'm wondering that in the context of whale. That economists bend stay up high enough for travel to come back and kind of support some of the revenue in time. So you know as far as the ecommerce sales forecast we are as andrew and cindy will have told you expecting this is like a permanent step changes that we've accelerated by a couple of years this year. We're not going back for retail sales and we are basically expecting a sort of mirror almost of that to happen digital ad spending that includes surge but also includes display which is really heavy channel at this point especially in those social platforms. That eric mentioned a minute ago. And so what. We're actually expecting now for certain pockets of digital ad. Spending is that by the end of our forecasts. You know in twenty twenty three twenty twenty four we now are projecting higher search spending than we saw would happen in those years before the pandemic so another way of saying it is that we think that even though search is kind of having a rough year this year because of travel it's only growing single digits. Not only will rebound from there. But ultimately it will be bigger than than we ever expected because of this than faster-than-expected retail sales. Okay eric. yeah end to kind of piggyback off of that. We do think that e commerce sellers will spend a structurally higher percentage of their sales on advertising most notably performance advertising like search. And you know kind of social networks that sort of thing. Then you know a traditional retailer would spend on tv ads in largely because it's so performance base because it's so measurable because you can go back and attribute a lot of your spend backed actual sales a lago advertising spend back to the actual sales now and that's really what's driving that increase and so far that's in the case. I mean the flip side to that is i mean. We may be wrong when he talked about. What's happened over the past ten months or so. We've seen the single largest shock to consumer habits that we've seen probably ever so i mean if you're in the e commerce space you have to be looking at your sales right now in saying okay well. There's you know. Rapidly changing consumer behavior. And now's the time to spend money to try and capture market share. That sort of thing while people are willing to be persuaded because everything else in their lives as up in the air but for now we think that you know spending will continue to increase next year and that you know. This isn't just some sort of pandemic induced ad spending binge that is going to turn back next year so sticking with senate for a second. The doj department of justice followed the lawsuit against google focusing on alleged anticompetitive practices and their market dominance one of the elements that of that zeroed in on google paying apple to feature chrome. Some a question folks. How likely the governments to prevent google from being an apple to be the default search on its devices. And how much of an impact could that have on google if it did happen. Hypothetically some interesting hypotheticals you have to consider with that. You know if just purely hypothetically google was not allowed. Pay apple to be the default search iphone. I can't imagine them allowing microsoft or duck duck go to pay a significant amount of money to be the default search likely. There's going be some sort of search pain where users are asked to select their preferred search in safari. Now likely most people are going to still choose. Google and that's kind of the interesting thing and google pays out. You know about ten to fifteen percent of their total search ad revenues to their partners like apple and some of these other browser providers and you could run into the situation where they see similar amounts of ad spending going over their platform but they keep even more of it. Because they're not allowed to pay anyone for you know these default deals in you know. We don't know the exact terms of these default deals but they're likely revenue shares or appear to be very close to revenue shares. Might be a click. Share that sort of thing. Sarah rob copeland the wall street journal. Noting google took the unusual step this month of releasing a guide on how to switch to competitors such engines in an effort to show the option. Remains folks. this Step away from such a second and talk about youtube So you made five billion dollars in q. Three up thirty two percents year on year. It say a v shaped recovery indeed. It went from thirty three to six to thirty two percent growth. Q one to q three your thoughts on. How youtube This quarter and how it's done guest. Now we've got three quarters worth a data in the books. How it's done this year. I guess i take a lot of what i said about. Search engines pump excitement level up by ten times or something. I mean you know. Youtube has been growing faster. Four awhile from a smaller base video growth very high for several years now. Very popular with both direct response and brand advertisers for lots of reasons in youtube is really like the premium mir destination of this type of advertising for digital and yet they outperformed our expectations like search did but more so youtube has performed really strongly this year during the pandemic. Yeah and you know looking at all the companies we talk about. I know marcus. I've spoken with you about an absurd number of companies. A youtube is i think. Probably the most impressive company to me Over not lying. He says that it's not only for the podcast. It's it's a when you look at what they've done. I think there's two really interesting. Pockets of growth right now digital advertising this pre pandemic and post pandemic. It's okay you know kind of video. Advertising and e commerce channel advertising like what you see going over amazon that sort of thing but when you look at the video advertising a lot of those companies fairly small roku is fairly small hulu is large but youtube is significantly larger than everyone else and for them to grow at thirty percent in a quarter in the middle of a pandemic and see brand dollars when everyone's talking about direct response. That's very very impressive. And that's not even talking about their subscription offerings which are surprisingly very very large. So they're doing a lot of things right. And i mean something about youtube that really maze may or surprise me is back in july and august when we're talking about this facebook advertiser boycott where you know. Advertisers were pulling back from facebook because they felt that it wasn't brand safe. While if you flashback you know a couple of years ago. There were the same arguments happening with youtube where advertisers were having ads run. Over objectionable content disney notably pulled out a lot of ad. Spending on youtube i believe. At did as well. There are a couple scandals around that but when we spoke with advertisers about so where are you going to put your facebook spend that you now cottingham and a lot of them came out and said well you know. We're looking at youtube. Were looking at some of these other things and when you start to think. Hey i guess. They have their brand safety issues. Fixed people spend a lot of time on the site. They're targeting his just as good as facebook's it's obviously it's google so it's been a very very impressive company to see grow especially at that scale grenell's at just want to reiterate one of the points that eric made a second ago about youtube talking their rebound from brand advertisers so cfo Mentioned that on their call and none of the other executives. You know mark zuckerberg sheryl sandberg leded. Not mentioned brand advertisers on the facebook call only direct response. Advertisers have been called out by other platforms. That was something that i noticed. That was seemed like out unique to google. This is interesting. I say that not having read the transcript for the trade desk yet. So for the record will yeah. I mean that's kind of the interesting thing about digital advertising. Is this whole split between brand direct response when you look at more traditional forms of advertising. Tv it's almost entirely brand advertising trying to drive reach and frequency goals that sort of thing whereas a lot of what's happening on digital whether it's facebook or google searches incredibly performance based youtube and some of these other video properties are some the only properties that are predominantly grand. I'm thinking about see tv. Ott that sort of thing. So couple of them is to really highlight. Just how well. Youtube has done this year. Really nine months ending september in two thousand twenty versus the same period jet youtube up twenty four percent so that thirty three six thirty two percent growth key one two and three averages out nine months ending september. Twenty twenty you choose up. Twenty four percents for those nine months from this year from last year and to eric mention subscriptions the subscription offerings youtube. Now has thirty million paid subs up from twenty million the end of last year. Yeah and you know the really impressive thing is so they have a couple different subscription offerings. They have thirty million paid subscribers to youtube premium in youtube music. But the number that really stood out to me was and that's actually up from twenty million at the end of last year so fifty percent growth in three quarters but the number that really stood out to me was youtube tv number now. That's something that i care about a lot. A lot of people don't now it's a bit of a niche thing but youtube tv is there you know the mvp their digitally delivered cable tv service and they grew subscribers to three million by the end of this past quarter from two million by the end of last year. Now that sound lot smaller than that. Thirty million and twenty million number. That i just threw out but youtube. Td cost sixty five dollars a month. Now s people and that's not even given the ad is exactly what you're gonna say on and they've raised the price from fifty dollars to sixty five dollars over the summer so they were still able to massively grow their subscriber base even though they significantly increase prices on it and importantly to furlough that period. There weren't sports on tv and the primary selling point for youtube. Tv's the ability to access live sports channels like espn alicarte month to month basis. So and they did mention that youtube. Tv grew in every quarter of this year. So it's not as if people completely cut in q two and then came back when sports returning key three but that growth is really impressive at my mind. So we're expecting a significant bounce back for youtube hs ad revenue in twenty twenty one Bounced back is done. Well this year But we're expecting to to return to levels pre pandemic levels and then a little bit more as well. Also growing fast ashley than twenty-nine growth. I can understand bounced back but goes it why respecting to bounce back this much. That's what we're expecting for the digital market as a whole were expecting for mobile as a whole. It's lower expecting for see tv as a whole. It's a lot of. It's coming from that brand advertisers returning and we think you know kind of like what we were talking about the search earlier when you look at these video properties the covid nineteen pandemic has massively accelerated cord cutting and the shift away this audience shift away from you more traditional linear tv and ultimately that means that if you are a brand advertiser who invest video. You're going to need to start. Investing more not services and digital video properties and youtube really is the one service that has massive reach in the. Us who close roku is close but again youtube On a much larger scale than those other ads for options Folks google ads attribution reporting when now include youtube Seen expanding to display ads in the coming months as they say as our the breaking news that explains if a consumer which is an ad for products on youtube and then they find in by the item by google. Search that purchase can now be traced back to the original. Youtube ad close quotes. Google also expected to expand state driven attribution tool to smaller advertisers How big this. i mean. i wouldn't necessarily say this one very specific expansion is a huge deal. But it's part of a very important overarching trend providing these multichannel attribution tools. Doing it in a way that is accessible for smaller as opposed to those who have been able to hire third parties and also frankly doing it either by or simply within a walled garden like google where they have lots of access to data and can kind of you know really show off. Look how much we say. Your advertising with us earns in a way that smaller publishers without access to that much data just can't compete with Finally folks on the lead story. Google network members properties. We had a five point seven billion in q. Three this year up from five point three billion in q. Three of last year. That's nine percent some of the main takeaways for you guys with augusta. This number broken record say again In this segment. Google outperformed our expectations. This one falls in between youtube and search as far as how much outperform expectations by. But i would say that points to some decent health for the programmatic market outside the walled gardens and it is the walled gardens that we primarily get to learn about al at this time of the year during earning season when we hear from the likes of facebook twitter. Snapchat pinterest etcetera. I'm so this is kind of a view into other programmatic display and we also got that last week with some very strong quarterly results from the trade desk. Final style mentioned net income for our bet was up eleven billion for the quarter which was a new records as up sixty percent six zero year on year as time for the story quit what about some amok to research. We have on offer and then we'll be back with in other news all right. Nicole joins me the other side of the jingle to tell me a little bit about what she's working on the call. What have you published most recently working on for the future so most recently In fact exactly a week ago. I published a report on search marketing. So this report actually goes into a bunch of the numbers that we were talking about just now including are updated search forecast and our outlook on e commerce channel advertising and why we think that the channel shift of retail to digital is going to really drive an expanded amount of performance ab spending going forward including within search. If you're a pro subscriber already you access to all that good stuff and more if you're not going to amongst dot com to become a pro subscribe. You read all the research a much much more. Cool all right. We're back folks today in other news. How much of a concern is fraud within. Ctb advertising were the implications of this new twenty. Four measure and. How good are advertisers getting provoking emotional responses story one in september ad fraud analytics company double verify uncovered a scheme targeting. Premium publishes on connected. Tv mobile devices around one million dollars a month for being stolen from advertisers. Botnets cord multi tara That was faking inventory from publishers premium. Publishers are often the target of fraud since the ad rates will cpm's so high which makes them a more efficient target according to double verify See tv traffic rates. Were up one hundred and sixty one percents in twenty twenty year on year nicole. How much of a concern is ad fraud within see tv advertising and how much it's pollution of the medium affect advertisers. Interact with it. Well it's genuinely impossible to say how much of a problem it is. You know if you look at stats like this. It seems like it's a massive problem. It's common for these fraud. Networks to be uncovered within see tv and various verifications with providers have put out research suggesting that a large amount of see. Tv impressions are not truly see tv impressions on the other hand buyers will often tell you oh i would only ever by. Cptv through a p. m p. Because i know how dangerous fraud is so i would say the you know buyers are probably not that careful in real life in our in some of these cases victims of this fraud. But it's also just really hard to say you know how much this is. Open market inventory that like just kinda sketchy inventory. That big advertisers are avoiding any way one. The interesting things about see tv is how much inventory sharing there is when you look at the kind of tv market in general. There's a couple of different people who are selling ads and may not even network that you're actually watching so if you're watching the espn and your comcast subscriber comcast is selling the ads in the espn broadcasts. And that's really shifted over to see tv medium where depending on what you're watching there's a number of different people who might be selling ads on that broadcast and have different inventory and everything's going over different servers. Different servers may not be talking to each other. So you can buy hulu inventory through a couple of different sources you can buy pluto. Tv inventory from a couple of different sources. So it's not. That fraud is incredibly prevalent here. It's a lot of times. People don't necessarily know what they're buying or you know who they're buying it from and that can lead to confusion and that's where you get this whole issue of fraud where people try and step in and misrepresent inventory and say hey look we have inventory from this premium publisher and it's really you know. Fake story to california folks voted for proposition. Twenty four fifty six percent to forty four percent is how the vote shaked out shook out either one known as the california privacy rights act. Cpr a which does a couple of things a expansion strengthens the state's existing privacy laws cpi the california consumer privacy act and be calls for the establishment of a new state agency responsible for enforcing the law. Marketers will be paying most of their attention to section a the expansion of privacy laws bit because consumers will now have more ways to opt out of data collection and the faculty to limit the use. Of course sensitive data think race sexual identity nicole. What the implications of this new Twenty four measure. Yeah so a few important differences between this and the cpa. You mentioned the new category of sensitive data. There's also the fact that this law makes it explicit that the issue is not merely about selling data. You know in our industry people often linked to say that we're not really selling data so you're not going to be able to just use that. As the reason you can use data for targeted advertising measurement and the other thing is that it creates a new bureaucracy for dealing with this regulation in terms of of promulgating at and also enforcing it so it takes us out of the state. Ag's office and presumably puts on more attention on it. You know since california is so big these types of laws if they are unique to california and we don't have a federal law tend to become a sort of defacto standard. Which is i think what we can expect for this if there is no federal law between now and when this goes into effect which will be a little over a year from now so theoretically there are some time to get. Federal legislation passed in there but based on the events of last week. Not sure how likely that will be on. Par be this. New dedicated agency will shout fines to companies the violate the law with the district. Attorney's having the power to sue the agency will start with Ten million dollars to get off the ground story. Three global emotional artificial intelligence company affect tiba house tracks. How consumers have emotionally engaged with content over the past decade and they show advertisers getting better at provoking emotional responses both positive and negative from folks with an emphasis on more sadness and polarized emotions. Nicole you cover consumer attitudes for us. We'll have you seen with regards to how folks interprets emotionally infused adds some pretty interesting research because it's not too often now. We see research that does go into this question of emotion or affect. And it's difficult to do this research because it's much harder than just like asking someone in a survey of of what you think of this ad or something you have to really do is an eye tracking research. They attract people's facial expression really looking into the movements of human subjects and stuff so they had some very interesting findings. I would love to learn more about it. They talked about the fact that responses to ads. Were pretty polarized that some people would have a very positive reaction while others had a very negative reaction. And i think that's the kind of thing that you know. Marketers would really love to understand better and make sure that as they're trying to appeal to maybe one part of their target audience. They're not alienating part but without more information it's sort of hard to say how you would know about that. Good point sue the findings. They they had in his jumped out to me one. The research found consumers respond positively to ads acknowledging the coronavirus crisis if they provide tangible help however they is a more negative reaction when brands referenced. The crisis in generalities a without concrete action in most cases folks to respond. Well to of course business as usual and humorous as rather than pandemic content number. Two they say a happy ad doesn't mean a happy viewer. Actors in advertising are more likely to smile than to show any other expression review is a far less likely to smile in response. Positive engagement comes from developing powerful narratives that resonate with the audience as we got time for. Thank you to my guests. Thank you to call. Thank you thanks eric. Thank you to say hello. Ask us any questions. You can email us. Cossio monster dot com we tomorrow with another episode of the behind the numbers. Daily emarketer podcast.