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Video/e-comm maintain ad.momentum

Momentum maintained in ad spends; video consumption shoots up

Digital ad tech giants have reported yet another healthy quarter for advertising spends, as ad revenue for Alphabet/Meta grew 13% YoY/26.8% YoY in Q1CY24. This was helped by: 1) a surge in video consumption across Meta’s platforms, with >60% of ‘user time spent on Facebook and Instagram’ dedicated to watching video content and 2) record number of YouTube channels uploading YouTube Shorts (up 50% YoY), resulting in video watch time across YouTube growing considerably for both YouTube Shorts and Connected TV. Growth in Meta’s ad revenues was once again dominated by impressions (up 20% YoY), as price per ad was up by 6% YoY.                  

AI-led digital advertising – Driving better conversions

AI-driven advertising tools are bearing fruit for Meta as Advantage Plus Shopping and Advantage Plus App Campaigns have doubled revenue YoY, with a 28% YoY decline in cost per click (CPC) compared with conventional ad targeting methods. For Alphabet too, the integration of GenAI into Performance Max led to 5% higher conversions at a similar CPC in Search and Performance Max campaigns. For Amazon, 100,000+ sellers are utilizing various GenAI tools offered. Furthermore, there exists strong potential for Amazon’s Connected TV ads offering Prime Video ads, as it offers greater ad targeting and measurement capabilities.

Faster, same-day deliveries – Improving customer experience

Amazon’s significant investments to enhance the efficiency of its delivery networks have yielded very positive results, with the company achieving its quickest delivery speeds to Prime Members in the US – >60% of Prime Members (compared with 50% in Q2CY23) received orders either the same day or the next day, across the top-60 largest metro cities.          

Read-through for India plays – Traction in e-comm ad.revenue

We believe adoption and shift in digital advertising to e-commerce/CTV (video) segment in India and emerging markets (EMs) augur well for Affle, given fragmentation in e-commerce/video segment. We retain our view that ad revenue is a big profitability lever for e-commerce plays. With Amazon’s ad revenue up 24.3% YoY in Q1CY24, expect ad revenue of Indian e-commerce firms to grow higher due to large and deeper penetration opportunities, which could potentially imply better ad. revenue growth for Indian e-commerce firms, including listed companies like Zomato/Blinkit. Also, with the rise of quick commerce and convenience led purchase, major e-commerce players may enter the realm of faster delivery services (one day, two day, etc., for all products). This move not only positions them to compete with quick commerce firms but also enhances overall customer experience.

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