Advertising Tech

Admix raises $7M to bring more ads to games, VR and AR

Posted by | Admix, Advertising Tech, force over mass capital, funding, Fundings & Exits, Gaming, Recent Funding, Startups | No Comments

Adtech startup Admix is announcing that it has raised $7 million in Series A funding.

The London-based company was founded by CEO Samuel Huber (previously owner of an indie gaming studio) and COO Joe Bachle-Morris (who previously worked in the ad agency world). The company is working to bring ads to games, esports, virtual reality and augmented reality.

In-game advertising is already a huge market, but Admix says it’s differentiated by focusing on building a product that supports game advertising at scale, where advertisers can bid programmatically through traditional ad-buying platforms, rather than relying on an ad agency model.

For developers, Admix offers an SDK for the Unity and Unreal game engines, allowing them to drag and drop into their games ad formats like billboards, posters and 3D spaces. The startup says it’s working with more than 200 developers and is running campaigns from more than 500 advertisers each month, with past advertisers including National Geographic, Uber and State Farm.

“The concept of putting ads in games is obviously not new, but the scalability of our solution is what is revolutionary, delivering instant and consistent revenue to game makers, or streaming platforms,” Huber said in a statement. “This coupled with the fact that 1.5B people play games globally every day, means that gaming is becoming a truly mainstream advertising channel.”

Admix previously raised $2.1 million, according to Crunchbase. The Series A was led by U.K.-based Force Over Mass, with the participation from Speedinvest, Sure Valley Ventures and Nigel Morris (a former Dentsu Aegis executive), as well as other angel investors.

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Extra Crunch Live: Join Verizon CEO Hans Vestberg for a live Q&A May 26 at 2pm ET/11am PT

Posted by | 5g, Advertising Tech, ECL, Ericsson, events, Extra Crunch, Extra Crunch Live, hans vestberg, Lowell McAdam, Media, Mobile, TC, Verizon Communications, Verizon Media | No Comments

Hans Vestberg, CEO of Verizon Communications, is a busy man. He’s also a business man. He’s a busy businessman, but has graciously made time to join us for an episode of Extra Crunch Live, our ongoing speaker series for Extra Crunch members.

We’re thrilled to have Vestberg as a guest on the show! The episode will air on May 26 at 2pm ET/11am PT.

Full disclosure: Verizon is the parent company to TechCrunch, which means that Vestberg is our boss’s boss’s boss’s boss.

Vestberg was previously CEO at Ericsson and joined Verizon as chief technology officer and EVP of network and technology in April of 2017. In June of 2018, the company announced that Vestberg would succeed Lowell McAdams as CEO of Verizon Communications. The promotion was made official that August.

Vestberg is unlike some of our previous guests on Extra Crunch Live — VCs like Kirsten Green, Roelof Botha and Charles Hudson and entrepreneurs like Mark Cuban. Vestberg is an operator at the helm of one of the world’s biggest corporations, and, as such, provides a unique perspective on adaptation strategies during the coronavirus pandemic.

Not only can attendees plan to hear about how Verizon is thinking both short and long-term about the effects of this pandemic on business, but also about how things are changing internally at the company, from re-opening offices to keeping morale high.

Vestberg leads a company with thousands of employees and can help founders understand how to manage a company at scale, particularly during a time when decisions are being made quickly and the stakes are high.

We’re also interested in talking to Vestberg about the company’s 5G rollout. 5G technology has huge implications for startups, especially as video conferencing and high-bandwidth communication formats become more popular in the midst of physical distancing.

Oh, another important thing! We’re not going to be the only ones asking questions. Extra Crunch members can also ask their questions directly in the Zoom call. So make sure you come prepared! If you’re not already a member, you can join Extra Crunch here.

Again, this episode of Extra Crunch Live with Hans Vestberg goes down on May 26 at 2pm ET/11am PT. You can find the full details below the jump.

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7 VCs talk about today’s esports opportunities

Posted by | Advertising Tech, artificial intelligence, coronavirus, COVID-19, Entertainment, esports, Extra Crunch, Gaming, Investor Surveys, machine learning, Startups, TC, Venture Capital | No Comments

Even before the COVID-19 shutdown, venture funding rounds and total deal volume of VC funding for esports were down noticeably from the year prior. The space received a lot of attention in 2017 and 2018 as leagues formed, teams raised money and surging popularity fostered a whole ecosystem of new companies. Last year featured some big fundraises, but esports wasn’t the hot new thing in the tech world anymore.

This unexpected, compulsory work-from-home era may drive renewed interest in the space, however, as a larger market of consumers discover esports and more potential entrepreneurs identify pain points in their experience.

To track where new startups could arise this year, I asked seven VCs who pay close attention to the esports market where they see opportunities at the moment:

Their responses are below.

This is the second investor survey I’ve conducted to better understand VCs’ views on gaming startups amid the pandemic; they complement my broader gaming survey from October 2019 and an eight-article series on virtual worlds I wrote last month. If you missed it, read the previous survey, which investigated the trend of “games as the new social networks”.

Peter Levin, Griffin Gaming Partners

Which specific areas within esports are most interesting to you right now as a VC looking for deals? Which areas are the least interesting territory for new deals?

Everything around competitive gaming is of interest to us. With Twitch streaming north of two BILLION hours of game play thus far during the pandemic, this continues to be an area of great interest to us. Fantasy, real-time wagering, match-making, backend infrastructure and other areas of ‘picks and shovels’-like plays remain front burner for us relative to competitive gaming.

What challenges does the esports ecosystem now need solutions to that didn’t exist (or weren’t a focus) 2 years ago?

As competitive gaming is still so very new with respect to the greater competitive landscape of content, teams and events, the Industry should be nimble enough to better respond to dramatic market shifts relative to its analog, linear brethren. A native digital industry, getting back “online’”will be orders of magnitude more straightforward than in so many other areas.

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Attentive raises another $40M for mobile messaging, will invest in helping customers respond to COVID-19

Posted by | Advertising Tech, Attentive, coatue, coronavirus, COVID-19, funding, Fundings & Exits, Mobile, sequoia capital, Startups | No Comments

Mobile messaging startup Attentive continues to bring in new funding.

The startup raised a $40 million Series B last summer, followed by a $70 million Series C at the beginning of this year. Today it’s announcing that it’s extended the Series C by another $40 million, bringing the total round size to $110 million.

CEO Brian Long (who previously founded TapCommerce with his Attentive co-founder Andrew Jones and sold the company to Twitter) told me that the new funding closed just a week ago. He said the money comes from institutional investors who had wanted to participate in the Series C, but “for whatever reason, the timing didn’t work out.”

Then, as the startup wanted to invest in new areas — particularly in response to the COVID-19 pandemic — Long reached out again. Once they saw Attentive’s numbers for the first quarter of 2020, the firms were willing to invest.

Apparently, the number of new customer sign-ups is only increasing, with Attentive now working with more than 1,000 businesses. Companies like Coach, Urban Outfitters, CB2, PacSun, Lulus and Jack in the Box use the platform to manage their mobile messaging, with tools around adding text message subscribers, creating engaging messages and tracking the results of those campaigns.

And while we’re at the beginning of what’s likely to be a dramatic slowdown in advertising and marketing, Long suggested that even if businesses pull back on acquiring new customers, they’ll still need to maintain a relationship with existing ones.

“CRM is such a critical channel for companies … email and text are the last thing you would shut down,” he said.

Sequoia Capital Global Equities and Coatue are the new investors in the Series C. Sequoia’s venture fund already led (or co-led) the Series C and the Series B, but Long said he was interested in working with the firm’s crossover fund — and with Coatue — partly because they invest in public companies as well.

Not that he has immediate plans for Attentive to go public, but he said, “It just creates optionality,” so that there are fewer financial pressures regardless of the route the company takes.

Other investors in the Series C include IVP, Bain Capital Ventures, NextView Ventures, Eniac Ventures and High Alpha.

“Attentive’s rapid growth is an indicator of how consumers are eager to find a more direct, personalized and efficient channel to interact with businesses,” said Jeff Wang, managing partner at Sequoia Capital Global Equities, in a statement. “We’ve been impressed by how quickly Attentive’s business has scaled, its strong customer momentum, and the expertise of the team. We are thrilled to increase Sequoia’s partnership with Attentive through our Global Equities fund.”

As for how Attentive is responding to COVID-19, the startup plans to create funds to help customers navigate the economic fallout. There will be more details released in the coming weeks, but Long said the idea is to launch funds focused on the e-commerce/retail, food/beverage and educational sectors, providing free access to Attentive tools and services “to help those companies get recharged.”

Long added that he hopes to grow Attentive’s headcount from 260 employees to more than 400 by the end of this year.

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Declining ad rates may signal a reset for startup SEM strategies

Posted by | Advertising Tech, Airbnb, Google, Mobile, search engine marketing | No Comments

With limited prospects for growth, one of the iron laws of economic downturns is that advertising is among the first budgets to be cut.

Advertising revenues have already cratered at many alt-weekly newspapers, which heavily rely on local events and restaurants that have been shuttered in the wake of the COVID-19 outbreak. BuzzFeed even went so far (as they do) to label it a “media extinction event.”

Clearly it’s bad times, but I wanted to get a lot more granular around the data for ad rates, particularly around top startups. So I compiled a list of a little more than 100 unicorns across a variety of sectors and explored how the prices of their search engine keywords have changed with the global pandemic that is sparking a global recession.

The results aren’t surprising — there has been a collapse in prices for almost all ads (with some very interesting exceptions we will get to in a bit). But the variations across startups in their online ad performance says a lot about industries like food delivery and enterprise software, and also the long-term revenue performance of Google, Facebook and other digital advertising networks.

A quick overview of the data

It’s common for startups to buy their own keywords on search engines like Google and the App Store. Owning that top rank guarantees that their own company’s page is the first result a user sees and prevents competitors from buying their name, potentially intercepting customers.

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Twitter CEO’s weak argument why investors shouldn’t fire him

Posted by | Advertising Tech, africa, Apps, augmented reality, coronavirus, cryptocurrency, Drama, Elliott Management, Finance, jack dorsey, Mobile, Personnel, Policy, Social, Square, Talent, TC, Twitter, vine | No Comments

Twitter CEO Jack Dorsey might not spend six months a year in Africa, claims the real product development is under the hood and gives an excuse for deleting Vine before it could become TikTok. Today he tweeted, via Twitter’s investor relations account, a multi-pronged defense of his leadership and the company’s progress.

The proclamations come as notorious activist investor Elliott Management prepares to pressure Twitter into a slew of reforms, potentially including replacing Dorsey with a new CEO, Bloomberg reported last week. Sources confirmed to TechCrunch that Elliott has taken a 4% to 5% stake in Twitter. Elliott has previously bullied eBay, AT&T and other major corporations into making changes and triggered CEO departures.

…Focusing on one job and increasing accountability has made a huge difference for us. One of our core jobs is to keep people informed. We want to be a service that people turn to… to see what’s happening, to be a credible source that people learn from.

— Twitter Investor Relations (@TwitterIR) March 5, 2020

Specifically, Elliott is seeking change because of Twitter’s weak market performance, which as of last month had fallen 6.2% since July 2015, while Facebook had grown 121%. The corporate raider reportedly takes issue with Dorsey also running fintech giant Square, and having planned to spend up to six months a year in Africa. Dorsey tweeted that “Africa will define the future (especially the bitcoin one!),” despite cryptocurrency having little to do with Twitter.

Rapid executive turnover is another sore spot. Finally, Twitter is seen as moving glacially slow on product development, with little about its core service changing in the past five years beyond a move from 140 to 280 characters per tweet. Competing social apps like Facebook and Snapchat have made landmark acquisitions and launched significant new products like Marketplace, Stories and Discover.

Dorsey spoke today at the Morgan Stanley investor conference, though apparently didn’t field questions about Elliott’s incursion. The CEO did take to his platform to lay out an argument for why Twitter is doing better than it looks, though without mentioning the activist investor directly. That type of response, without mentioning to whom it’s directed, is popularly known as a subtweet. Here’s what he outlined:

On democracy: Twitter has prioritized healthy conversation and now “the #1 initiative is the integrity of the conversation around the elections” around the world, which it’s learning from. It’s now using humans and machine learning to weed out misinformation, yet Twitter still hasn’t rolled out labels on false news despite Facebook launching them in late 2016.

On revenue: Twitter expects to complete a rebuild of its core ad server in the first half of 2020, and it’s improving the experience of mobile app install ads so it can court more performance ad dollars. This comes seven years late to Facebook’s big push around app install ads.

On shutting down products: Dorsey claims that “5 years ago we had to do a really hard reset and that takes time to build from… we had been a company that was trying to do too many things…” But was it? Other than Moments, which largely flopped, and the move to the algorithmic feed ranking, Twitter sure didn’t seem to be doing too much and was already being criticized for slow product evolution as it tried to avoid disturbing its most hardcore users.

On stagnation: “Some people talk about the slow pace of development at Twitter. The expectation is to see surface level changes, but the most impactful changes are happening below the surface,” Dorsey claims, citing using machine learning to improve feed and notification relevance.

Yet it seems telling that Twitter suddenly announced yesterday that it was testing Instagram Stories-esque feature Fleets in Brazil. No launch event. No U.S. beta. No indication of when it might roll out elsewhere. It seems like hasty and suspiciously convenient timing for a reveal that might convince investors it is actually building new things.

On talent: Twitter is apparently hiring top engineers “that maybe we couldn’t get 3 years ago.” 2017 was also Twitter’s share price low point of $14 compared to $34 today, so it’s not much of an accomplishment that hiring is easier now. Dorsey claims that “Engineering is my main focus. Everything else follows from that.” Yet it’s been years since fail whales were prevalent, and the core concern now is that there’s not enough to do on Twitter, rather than what it does offer doesn’t function well.

On Jack himself: Dorsey says he should have added more context “about my intention to spend a few months in Africa this year,” including its growing population that’s still getting online. Yet the “Huge opportunity especially for young people to join Twitter” seemed far from his mind as he focused on how crypto trading was driving adoption of Square’s Cash App.

“I need to reevaluate” the plan to work from Africa “in light of COVID-19 and everything else going on.” That makes coronavirus a nice scapegoat for the decision while the phrase “everything else” is doing some very heavy lifting in the face of Elliott’s activist investing.

Photographer: Cole Burston/Bloomberg via Getty Images

On fighting harassment: Nothing. The fact that Twitter’s most severe ongoing problem doesn’t even get a mention should clue you in to how many troubles have stacked up in front of Dorsey.

Running Twitter is a big job. So big it’s seen a slew of leaders ranging from founders like Ev Williams to hired guns like Dick Costolo peel off after mediocre performance. If Dorsey wants to stay CEO, that should be his full-time, work-from-headquarters gig.

This isn’t just another business. Twitter is a crucial communications utility for the world. Its absence of innovation, failure to defend vulnerable users and an inability to deliver financially has massive repercussions for society. It means Twitter hasn’t had the products or kept the users to earn the profits to be able to invest in solving its problems. Making Twitter live up to its potential is no side hustle.

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mParticle raises $45M to help marketers unify customer data

Posted by | Advertising Tech, Arrowroot Capital, funding, Fundings & Exits, Mobile, mparticle, Startups | No Comments

mParticle, which helps companies like Spotify, Paypal and Starbucks umanage their customer data, is announcing that it has raised $45 million in Series D funding.

Co-founder and CEO Michael Katz told me that the company has benefited from broader shifts — like new privacy regulation and the shift away from cookie-based browser tracking — that increase brands’ needs for a platform like mParticle that uses “modern data infrastructure” to deliver a personalized experience for customers without running afoul of any regulations.

As result, he said mParticle has nearly quintupled its revenue since it raised a $35 million Series C in 2017. (The company has raised more than $120 million total.)

“The challenges that we solve are universal,” Katz said. “It doesn’t matter if there’s a small company or big company. Data fragmentation, data quality, consistent change in the privacy landscape, consistent change in the technology ecosystem, these are universal challenges.”

Perhaps for that very reason, a whole industry of customer data platforms has sprung up since mParticle was founded back in 2013, all offering tools to help marketers create a single view of their customers by unifying data from various sources. Even big players like Adobe and Salesforce have announced their own CDPs as part of their larger marketing clouds.

When asked about the competition, Katz said, “The market has responded overwhelmingly by saying, ‘I don’t want one vendor to rule everything for me.’ Why be beholden to one suite of tools that’s just an amalgamation of products that were built in the early 2000s?”

Instead, he argued that mParticle customers want “a best-in-breed combination of independent solutions that can be integrated seamlessly.”

Getting back to the new funding — Arrowroot Capital led the round, with the firm’s managing partner Matthew Safaii joining mParticle’s board of directors. Existing investors also participated.

Katz said the funding will be spent in three broad areas: building new products, scaling its global data infrastructure and finding new partners. In fact, the company is also announcing a partnership with LiveRamp, through which mParticle customers can combine their first-party data with the third-party party data from Liveramp.

“We see this partnership with Liveramp as an opportunity to extend the surface area by which our customers can deliver highly personalized, privacy-friendly experiences,” Katz said.

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FTC votes to review influencer marketing rules & penalties

Posted by | Advertising Tech, Apps, eCommerce, FTC, Government, Influencer Marketing, instagram, Media, Mobile, Policy, Social, TC, tiktok, YouTube | No Comments

Undisclosed influencer marketing posts on social media should trigger financial penalties, according to a statement released today by the Federal Trade Commission’s Rohit Chopra. The FTC has voted 5-0 to approve a Federal Register notice calling for public comments on questions related to whether The Endorsement Guides for advertising need to be updated.

“When companies launder advertising by paying an influencer to pretend that their endorsement or review is untainted by a financial relationship, this is illegal payola,” Chopra writes. “The FTC will need to determine whether to create new requirements for social media platforms and advertisers and whether to activate civil penalty liability.”

Currently the non-binding Endorsement Guides stipulate that “when there is a connection between an endorser and a seller of an advertised product that could affect the weight or credibility of the endorsement, the connection must be clearly and conspicuously disclosed.” In the case of social media, that means creators need to note their post is part of an “ad,” “sponsored” content or “paid partnership.”

But Chopra wants the FTC to consider making those rules official by “Codifying elements of the existing endorsement guides into formal rules so that violators can be liable for civil penalties under Section 5(m)(1)(A) and liable for damages under Section 19.” He cites weak enforcement to date, noting that in the case of department store Lord & Taylor not insisting 50 paid influencers specify their posts were sponsored, “the Commission settled the matter for no customer refunds, no forfeiture of ill-gotten gains, no notice to consumers, no deletion of wrongfully obtained personal data, and no findings or admission of liability.”

Strangely, Chopra fixates on Instagram’s Branded Content Ads that let marketers pay to turn posts by influencers tagging brands into ads. However, these ads include a clear “Sponsored. Paid partnership with [brand]” and seem to meet all necessary disclosure requirements. He also mentions concerns about sponcon on YouTube and TikTok.

Additional targets of the FTC’s review will be use of fake or incentivized reviews. It’s seeking public comment on whether free or discounted products influence reviews and should require disclosure, how to handle affiliate links and whether warnings should be posted by advertisers or review sites about incentivized reviews. It also wants to know about how influencer marketing affects and is understood by children.

Chopra wisely suggests the FTC focus on the platforms and advertisers that are earning tons of money from potentially undisclosed influencer marketing, rather than the smaller influencers themselves who might not be as well versed in the law and are just trying to hustle. “When individual influencers are able to post about their interests to earn extra money on the side, this is not a cause for major concern,” he writes, but “when we do not hold lawbreaking companies accountable, this harms every honest business looking to compete fairly.”

While many of the social media platforms have moved to self-police with rules about revealing paid partnerships, there remain gray areas around incentives like free clothes or discount rates. Codifying what constitutes incentivized endorsement, formally demanding social media platforms to implement policies and features for disclosure and making influencer marketing contracts state that participation must be disclosed would all be sensible updates.

Society has enough trouble with misinformation on the internet, from trolls to election meddlers. They should at least be able to trust that if someone says they love their new jacket, they didn’t secretly get paid for it.

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Instagram prototypes letting IGTV creators monetize with ads

Posted by | Advertising Tech, Apps, Creator Monetization, Entertainment, IGTV, instagram, instagram ads, Media, Mobile, Social | No Comments

Instagram may finally let IGTV video makers earn money 18 months after launching the longer-form content hub. Instagram confirms to TechCrunch that it has internally prototyped an Instagram Partner Program that would let creators earn money by showing advertisements along with their videos. By giving creators a sustainable and hands-off way to generate earnings from IGTV, they might be inspired to bring more high-quality content to the destination.

The program could potentially work similarly to Facebook Watch, where video producers earn a 55 percent cut of revenue from “Ad Breaks” inserted into the middle of their content. There’s no word on what the revenue split would be for IGTV, but since Facebook tends to run all its ads across all its apps via the same buying interfaces, it might stick with the 55 percent approach that lets its say creators get the majority of cash earned.

Previously, Instagram only worked with a limited set of celebrities, paying “to offset small production costs” for IGTV content Bloomberg reported, but not offering a way to earn a profit. That left creators to look to sponsored content or product placement to generate cash, or to try to push their followers to platforms like YouTube where they could earn a reliable cut of ads.

A lack of monetization may have contributed to the absence of great content on IGTV. Many of the videos on the Popular page are low-grade rips of YouTube content or TV, or are clickbait teasers. That has led to mediocre view counts — only 7 million of Instagram’s billion-plus users downloading the standalone IGTV app — and Instagram dropping the homescreen button for opening IGTV.

That’s all disappointing considering TIkTok is blowing up on the back of more purposeful, storyboarded mobile video entertainment. Instagram has been looking at other ways to boost the quality of content users see, including today’s launch of unfollow suggestions.

But today, reverse engineering master and perennial TechCrunch tipster Jane Manchun Wong tipped us off to the IGTV monetization prototype she dug out of the code of Instagram’s Android app. She tells TechCrunch she first saw signs of the program a week and ago and was then able to generate screenshots of the unreleased feature. It shows an “Instagram Partner Program” with “Monetization Tools.” This seems to be different from the old “Partner Program” for business tool developers.

Users who are deemed “Eligible” according to criteria we don’t have info about could choose to “Monetize Your IGTV Videos.” The screen explains that, “You can earn money by runing short ads on your IGTV videos. When you monetize on IGTV, you agree to follow the Partner Program Monetization Policies.”

It’s not clear IGTV’s monetization policies would be different, but on Facebook they require that users:

  • Follow all its normal Community Standards about decency.
  • Share authentic content without misinformation, false news, clickbait, or sensationalism.
  • Share original content they made themselves.
  • Avoid restricted content categories including debated social issues, tragedy or conflict, objectionable activity, sexual or suggestive activity, strong language, explicit content, misleading medical information, and politics and government.

Instagram confirmed to TechCrunch the authenticity of the prototype it’s been working on and provided the following statement (that it later tweeted): “We continue to explore ways to help creators monetize with IGTV. We don’t have more details to share now, but we will as they develop further.”

Given the company is confirming this as a prototype rather than a feature being beta tested, there are no public mentions. There’s no Instagram Help Center information published about it, and Instagram might not be testing the program externally yet. There’s still a chance Instagram could change directions and never launch the monetization program or alter it entirely before any eventual launch.

Update: Instagram CEO Adam Mosseri has commented on the new feature, replying to me here:

It’s no secret that we’ve been exploring this. We focused first on making sure the product had legs — else there would be little to monetize in the first place. IGTV is still in its early days, but it’s growing and so we’re exploring more ways to make it sustainable for creators.

— Adam Mosseri (@mosseri) February 7, 2020

Mosseri’s argument is that monetization hadn’t started sooner because Instagram wanted to ensure there was enough content to monetize. But Instagram had the money and scale to experiment much sooner, and it could have attracted that content to monetize by dangling payment.

IGTV has improved with time as more influencers and publishers get the hang of vertical mid-length video. However, there remains a fair amount of low-quality, unoriginal, overly captioned, meme-style videos promoted on its “Popular” page, at least for me.

The slow march of creator compensation

Creator monetization has been a slow-going evolution on many of the major social networks. While YouTube was early to the space with ads, Twitter, Facebook and Snapchat are now testing an array of ways for influencers to earn money. Those include ad splits, subscriptions to exclusive content, tipping, connections to brands for sponsorship, merchandise sales and more.

Bloomberg’s Sarah Frier and Nico Grant reported this week that Instagram brought in $20 billion in revenue during 2019. It gets to keep that revenue since it currently doesn’t split any with creators. That contrasts with YouTube, which says it took in $15.1 billion in 2019 revenue this week in the first time it’s revealed the stat, though it has to pay out a substantial portion to creators. With Instagram now running ads in feed, Explore, and Stories, only IGTV and Direct remain as major surfaces lacking ads.

Social apps are wising up and realizing that if they want to keep their creators from straying to competitors and bringing fans with them, it needs to offer ways for people to turn their passion for creating content into a profession. IGTV spent a year and a half trying to get video makers to volunteer for free, and the result wasn’t entertaining. Now Instagram seems ready to share the proceeds if they can bring in viewers together.

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Snapchat hits 218M users but big Q4 losses sink share price

Posted by | Advertising Tech, Apps, augmented reality, Earnings, Evan Spiegel, lawsuit, Mobile, snap inc, Snapchat, Snapchat earnings, Social, TC | No Comments

Snapchat still isn’t profitable nearly two years after its IPO. In Q4 2019, Snap lost $241 million on 560.8 million in revenue that’s up 44% year-over-year and an EPS of $0.03. That comes from adding 8 million daily users to reach a total of 218, up 3.8% this quarter from 210 million and 17% year-over-year.

The big problem was a one-time $100 million legal settlement that pushed it to lose $49 million more in Q4 2019 than Q4 2018. That comes from a shareholders lawsuit claiming Snap didn’t adequately disclose the impact of competition from Facebook on its business. The IPO was soured by weak user growth as people shifted from Snapchat Stories to Instagram Stories.

A rough Q4

Snapchat had a mixed quarter compared to estimates, exceeding the EPS predicitions but falling short on revenue. FactSet’s consensus predicted $563 million in revenue and a loss of $0.12 EPS. Estimize’s consensus came in at $568 million in revenue and an EPS gain of $0.02.

Snapchat shares plunged over 10% in after-hours trading following the announcement. Shares had closed up 4.17% at $18.99 today. That’s up from a low of $4.99 in December 2018 when its user count was shrinking under competition from Instagram Stories. It’s now hovering around its $17 IPO price but it’s still under its post-IPO pop to $27.09.

Snap gave stronger than expected revenue guidance for Q1 2020 of $450 million to $470 million, and 224 million to 225 million users. The company’s CFO Derek Anderson says that “Q4 marked our first quarter of Adjusted EBITDA profitability at $42 million for the quarter, an improvement of $93 million over the prior year.” Still, he predicts an Adjusted EBITDA in Q1 of negative $90 million to negative $70 million. That’s manageable for Snap without raising more money, since it now has $2.1 billion in cash and marketable securities, down $148 million quarter-after-quarter.

Snapchat 2020

“Throughout the course of 2019, we added 31 million daily active users, largely driven by investments in our core product and improvements to our Android application “said Snapchat CEO Evan Spiegel . “We’ve recently completed our 2020 strategic planning process and have aligned our teams and resources around our goals of supporting real friendships on Snapchat, expanding our service to a broader global community, investing in our AR and content platforms, and scaling revenue while achieving profitability in order to self-fund our investments in the future.”

Some other highlights:

  • 1.3 trillion Snaps were created in 2019
  • The average Snapchat user engages for 30 minutes per day,
  • Snapchat reaches 90% of US 13 to 24 year-olds and over 75% of 13 to 34 year-olds
  • Total daily time spent by Snapchatters watching Discover increased by 35% year-over-year, and its up 60% for users over the age of 25
  • Over 50 Snapchat shows reached a monthly audience of 10 million viewers or more
  • 75% of users engage with augmented reality per day
  • 20% of Snaps sent with an AR lens were made with commununity-developed lenses
  • 5X more users open the Lens Explorer now versus a year ago, and 10% of users open it every day

Snapchat’s user growth has been on tear thanks to international penetration, especially in India, after it re-engineered its Android app for developing markets. It gained users in all markets. Crucially, it raised its average revenue per user 23% from $2.09 in Q4 2018 to $2.58, though only from $1.24 to $1.35 in the Rest Of World region where it’s growing user count the fastest. Snap will need to figure out how to squeeze more cash out of the international market to offset the costs of streaming tons of video to these users.

Q4 saw Snapchat readying several new products that could help boost engagement and therefore ad views. Cameos, first reported by TechCrunch, lets users graft their face onto an actor in an animated GIF like a lightweight Deepfake. Bitmoji TV, which won’t run ads initially but could drive attention to Snapchat Discover, offers zany four-minute cartoons that star your Bitmoji avatar. We could see a bump to engagement from these starting in Q1 2020.

To retain its augmented reality filter creators, Snapchat has pledged $750,000 in payouts in 2020. It’s also expanded the use of product catalog ads, and now lets advertisers buy longer skippable ads.

Outside of the legal settlement, Snapchat is inching closer to profitability but still has a ways to go. It’s managed to develop a strong synergy between its popular chat feature that’s tougher to monetize, and the Stories and Discover content where it can inject ads. The big question is whether Facebook Messenger, Instagram, and WhatsApp will get more serious about ephemeral messaging that’s at the core of Snapchat. If it can hold onto the market and maintain its place as where teens talk, it could ride out its costs and build revenue until it’s sustainable for the long-term.

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