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Ad boom rains billions on Big Tech

Data: Company filings; Chart: Axios Visuals

Advertising growth was the chief driver of tech's blowout quarter, as the economy snapped back from the pandemic and a long-term shift to digital went into overdrive.

By the numbers: Facebook, Snapchat, Twitter, LinkedIn, YouTube and Google all posted record ad revenue growth rates in earnings reports for 2021's second quarter.

  • Facebook and Google grew ad revenues by 55% and 68% year-over-year, respectively.
  • Snapchat and Twitter both nearly doubled ad revenue year-over-year.
  • YouTube brought in a record $7 billion in ad revenue last quarter, more than Snapchat, Twitter and LinkedIn combined.
  • Microsoft said LinkedIn surpassed $10 billion in yearly revenue for the first time in its history, largely driven by momentum from digital ads.
  • Even Apple said it reached an all-time high in services revenue, which includes advertising.
  • Amazon, Etsy, Pinterest and other ad-driven tech giants are all expected to see similar gains when they report earnings in the coming week.

Of note: It's far easier for companies with relatively modest total ad revenues — like Twitter and Snapchat, which both stand at roughly $1 billion for the quarter — to show such fast rates of growth.

  • For companies the size of Google ($50.4 billion ad revenue) or Facebook ($28.6 billion ad revenue), it's wild.

Be smart: Three factors drove last quarter's monster growth:

  1. Digital transformation: The pandemic expedited the migration of eyeballs and ad dollars to digital platforms. Big Tech firms were uniquely positioned to reap the benefits of that shift.
  2. COVID crash: The ad market plummeted during the second quarter of 2020 and then rebounded dramatically beginning late last year. So this year's Q2 shows an extra big leap from last year's.
  3. Apple delay: The delayed rollout of Apple's new privacy feature means that tech companies weren't affected by ad-targeting changes as much as they will be in future quarters.

Flashback: A year ago, tech firms warned that ad revenue growth would slow down because of pandemic-related business cutbacks.

  • Fears of such headwinds forced tech companies to double down on other digital products, like e-commerce and short-form video.

Those investments are now paying off.

  • Facebook said Wednesday that video consumption accounts for nearly half of all engaged time on its platform. It says its TikTok competitor, Reels, is the largest contributor to engagement growth on Instagram.
  • YouTube says its TikTok competitor, Shorts, has surpassed 15 billion global daily views, up from the 6.5 billion that it previously announced in March. 

What to watch: Last quarter proved how resilient ad-driven tech firms have been through a period of extreme volatility. But growth rates are unlikely to be this dramatic in the second half of the year.

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