Essential Third-Quarter Stats for Ad Tech and Platforms

Editor’s note: Adweek worked with Matthew Scott Goldstein, a consultant with a deep knowledge of the media industry, to craft his quarterly newsletter into an Adweek article. Through his findings on various industry earnings calls, we’re bringing you insights about how your favorite brands, agencies, media companies, publishers and tech companies are performing on a quarterly basis. His goal was to go past what the trades were focusing on, which mostly revolved around revenue, and tap into the nitty-gritty data shared on these calls.

This iteration focuses specifically on ad tech and platforms in the 2019 third quarter.

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  • Criteo: Revenue ex-TAC, our key metric to monitor the business, was flat at constant currency at $221 million. New client business drove our performance, especially in the midmarket, offsetting a limited decline in our existing client business, despite continued adoption of our new solutions across the client base. Among the third-quarter highlights, our quarterly net client additions were again positive, with 240 net new clients, in line with our expectations. As in the prior quarter, this was again driven by focused execution and productivity improvements in our midmarket sales teams. Most exciting result for the third quarter is the momentum of our new solutions, which, as a reminder, include all our solutions outside of retargeting. They grew 57% on a revenue ex-TAC basis and now account for 11% of our total business, up from 7% a year ago. Over the past year, identity graph has also grown both in size—we have over 2 billion unique Criteo IDs—and in density: Over 95% of our Criteo IDs now contain long-term persistent identifiers rather than just basic cookies. Announced a new partnership with LiveRamp on IdentityLink. By combining LiveRamp’s identity solution with ours, we offer marketers additional capability to reach their customers in a privacy-by-design manner. We believe this enhanced identity solution is quite unique in the industry and very competitive compared to walled gardens’ own proprietary approach. This combination also broadens our reach by providing access to additional cookieless inventory, including connected TV. Over 4,200 publishers now connect to our direct bidder both on the web and app inventory. Regarding our legacy retargeting business, we saw a decline in the mid-single-digit range on a revenue ex-TAC basis. The softness was mainly concentrated in the large customer segment and is driven by two main factors: first, the much higher penetration we have reached here compared to midmarket; and, second, their delayed investment in mobile app marketing that doesn’t fully compensate for the slow erosion of browser usage yet. As discussed about retail media, we are seeing some of our most sophisticated retailers seek more control over their ad-tech stack. Sometimes, this appetite for control becomes even more important than campaign performance itself.  Google’s first-price: This is important. Google was the last large exchange, plus at a speed to move from second-price to first-price. And we were very well equipped for this transition, because we’ve been developing first-price bidding engines for a long time now. And as a result, their overall impact was likely positive for us because as we believe our first-price bidder is, all things equal, relatively speaking, better than the competition. We could take advantage of this change of Google to first-price to increase our bidding competitiveness. So, all in, it’s been a positive change for us. Second, to evolve from what was perceived as a narrow point solution to an actual tech platform, we made huge efforts migrating our managed services into self-service tools that can be operated directly by our clients, large and small, and their agencies. Regarding CTV, it’s an early market. It’s a very fragmented market today. And it’s a bit like the web, I would say, 15 years ago. So eventually one day it might consolidate into a handful of a super strong walled gardens—where was the web landscape 15 years ago? You had no walled gardens at all. You had a bunch of publishers that are all trying to better monetize inventory. And you mentioned Roku and others: They all looking to increase the value of their inventory and maximize the opportunities to monetize the inventory. And this is high-quality inventory, where you don’t have the typical flow that you have on the web. So this is what it’s promising. Right now, it’s a small market. We are testing the waters there, but I mentioned that as a midterm area of interest for us.
  • Rubicon: Revenue of $37.6 million, reflecting year-over-year revenue growth of 27%. Realized the first, albeit small, revenue from Demand Manager in the fourth quarter. Header bidding caused an explosion in ad requests over the past few years, and we’re focused on ingesting as many impressions as possible to really understand the new market dynamics of header. The third quarter started strong, followed by some volatility, which included: first, Google’s move to a first-price unified auction structure that included Google’s removal of last-look advantage, which had historically hurt win rates of others. Our long-term growth drivers remain unchanged: supply path optimization, video and Demand Manager. We are very pleased with our Demand Manager customer engagement with the additions of Business Insider, L.A. Times and Everyday Health among others. Fourth-quarter guidance: expect to post year-over-year revenue growth of approximately 25%. The year-over-year increase in revenue was once again driven by solid growth in both take rate and ad spend. Mobile revenue grew 26%, our desktop revenue grew 28% and video and audio revenue continued to be growth drivers in the quarter. Not updating our take rate guidance, but, at the beginning of the year, we talked about take rate being in the mid-13s and so we’ll stick with that. For the federal privacy initiative, which frankly we welcome, although we haven’t seen any details—I should be careful—but it sure beats having to do 50 different ones or in the states. Demand Manager: Instead of winning a small portion of a publisher’s inventory in our auction, we’re able to monetize 100% of their inventory, albeit at a much lower take rate. So we’re very excited about it; the traction has been terrific. Who’s their biggest competitor in market: Prebid itself.
  • Telaria: Revenue grew 23% year-over-year to $16.6 million with CTV growing 115%. CTV revenue grew to $7.3 million for the quarter and represents nearly 45% of our revenue, up from 39% of our revenue last quarter. CTV momentum has also driven an impressive 27% increase in platform eCPM, up year over year to $15.68 from $12.32. A recent report from advertising analytics and cross-screen media estimates political ad spend for the next election cycle could reach $6 billion in the U.S. with approximately $1.6 billion of that projected for digital video. With over 30% of U.S. households who are no longer reachable through traditional TV, CTV is becoming essential to reach and engage voters. Roku is a venue for which the vast majority of their ad sales have been direct, a pretty strong validation of that thesis around programmatic driving the future of CTV advertising. EMarketer came out with stats for CTV this year that grow at 40% for the year. The desktop business sees the most negative pressure on it. So if you look at industry statistics, desktop video will actually shrink over the next several years. Reaching a point of subscription fatigue, which we’ve talked about since day one, and there’s going to be a limited portfolio of subscription-based services that people are going to be willing to pay for and the rest of their viewing portfolio will really be made up of AVOD players. And I think that even with rumored transitions of even such things as the Peacock Network, which was supposed to be a fully SVOD network coming out as potentially an AVOD opportunity as well, you’re seeing the increase in advertising-supported platforms out there, actually creating a greater proliferation of opportunities for us as a company to help those guys monetize that inventory. So, again, I think these are great market tailwinds for us.
  • The Trade Desk: Revenue grew 38% year-over-year. Revenue was $164.2 million. Spend on our platform and connected TV was up 145% from Q3 of last year. We have seen strong growth in available CTV inventory, especially in live events. CTV is the most strategically important focus of our business going into 2020. Audio spend was up a stunning 162% year-over-year. Like CTV, audio is a large and growing market, about $3 billion according to PwC digital radio estimates. CTV and audio are two of the most effective forms of advertising because of high audience engagement. In the third quarter, almost half our revenue came from ads on mobile devices, which includes mobile video. In the third quarter, data was up 63% year-over-year. Content providers are not our direct customers. They are our partners. More and more, they are asking to work with us. It’s not just Amazon and Disney, as it’s other major global providers worldwide, including Channel 4 in England, ProSieben in Germany, TF1 in France and pretty much every other significant network and content providers. Seeing game-changing progress from other partners. For example, FreeWheel, the largest ad server in the CTV space, launched their version of header bidding, unified yield. With Amazon, the number of impressions on our platform increased 21 times during the quarter. 95%-plus retention rates. As the worldwide advertising market moves towards $1 trillion, The Trade Desk is perhaps the best-positioned company to win the largest share of the programmatic portion of that market, which is the fastest-growing segment. It’s an interesting move that Roku buys Dataxu. To just give a little bit of context in terms of size, this year, just round numbers, we’ll control a little over $3 billion in spend. They’ll do a little over $100 million in spend at dataxu. On the linear side, figures from Leichtman Research Group shows that the entire traditional linear TV industry lost about 1.53 million subscribers in the second quarter of 2019. Linear broadcasters are fighting for fewer viewers while content costs are going up. That’s a ticking time bomb. For advertisers, that means their ad-to-viewer ratio is worse than ever. Until recently, there’s been a sense that they have nowhere else to go. Expect CTV growth of over 100% again in 2020. Our investment also includes areas such as measurement, as advertisers look for the most precise information on campaign performance. Our measurement tools allow any agency or advertiser to use third parties for verification. This helps the ecosystem become more transparent and avoid the “grading your own homework” syndrome that advertisers experience with walled gardens.
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  • Netflix: Grew revenue to $5.2 billion, up 31% year-over-year. No mention of advertising. Some churn following price increases in the U.S. Five million net adds in the U.S. in 2018 and this year will be about 2.6 million. Focused on providing amazing value to members. Hulu, YouTube and Amazon Prime in 2007, 2008, in the market have been competing heavily with linear TV. Streaming is relatively small compared to linear TV. Compete broadly for entertainment time, believe less than 10% of TV screen time in the U.S. Uniquely positioned with a $15 billion cash content budget in 2019. On a very competitive show, there’s probably been 30% price escalation from this time last year. About 2 billion active users of Facebook, 2 billion active users of YouTube. There are 6 billion active mobile phones in the world. Netflix is a fraction of those figures. Established IP, like Disney+, has a leg up with consumers. They know what they’re getting into. There’s a pre-built-in excitement. It makes the marketing a little easier. No plans to announce doing something differently for password sharing. Looking to expand presentation of the top 10, so that people can come to Netflix and see the top 10 most popular things in different categories. Been moving increasingly to original content both because of the anticipated pullback of second-run content from some studios and because our original content is working in the form of member viewing and engagement. Very large increase in our marketing spend last year. This year, will spend at similar levels to last year, because we learned a lot. Continue to test and learn and find new and different ways to reach members every day. Just like the evolution from broadcast TV to cable, these once-in-a-generation changes are very large and open up big, new opportunities for many players.
  • Verizon: Verizon Media Group revenue was $1.8 billion, which was down 2.0% versus the prior year. Great takeup on our NFL that we have now with Yahoo! Sports. So all in all, our Verizon Media Group is executing on the strategy we laid out one year ago in a really good way. Gains in native and mobile advertising continue to be offset by declines in desktop advertising, though the business is building momentum in key areas. Migrating customers to our recently integrated native and demand-side advertising platforms with double-digit growth year-over-year. For the first time, seeing mobile traffic increases outpace desktop traffic declines in core owned and operated products, including sports, finance, news, entertainment, home and mail. Although it’s early in the NFL season, customer engagement has doubled over a year ago in terms of minutes watched as more and more fans are using their mobile devices to watch games on Yahoo! Sports. Diversifying monetization streams in Media Group, including additional customer engagement opportunities on Yahoo! Sports and fantasy platforms and the launch of new integrated content-to-commerce capabilities. Verizon Media Group over-the-top with of Yahoo! Finance, Yahoo! Sports, Yahoo! Entertainment, Yahoo! News: All of that is over-the-top services. Get engagement; learn how content is working. Have the advertising platform with owned and operated content that drives the flywheel of the advertising platform. Executing on the 5G strategy, and now up to 15 markets deployed our 5G Ultra Wideband. For Disney+, partner with the best partners, and it’s actually a win-win.
  • Twitter: Third-quarter revenue was $824 million, up 9% year-over-year. Total advertising revenue was $702 million, an increase of 8% year-over-year. During the quarter, encountered a number of unexpected headwinds in the ads business. Data licensing and other revenue totaled $121 million, an increase of 12% year-over-year. U.S. advertising revenue was $385 million, an increase of 11% year-over-year. Seventeen percent year-over-year increase of daily usage to bring us to 145 million product-related issues. By sales channel, large to mid-tier customers continue to represent a sizable majority of our advertising revenue, while our self-serve channel continues to deliver growth off a smaller base. By product, video ad formats continued to show strength, particularly our video website card and in-stream video ads. In aggregate, issues relating to revenue products reduced the year-over-year growth. Discovered and took steps to remediate bugs that largely affected our legacy MAP product. These bugs affected ability to target ads and share data with measurement and ad partners. Also discovered that certain personalization and data settings were not operating as expected. Still have more than half of our video ads being served at longer than 15 seconds. As you’d imagine on a service like Twitter, the completion rates for video ads that are six seconds are much better: They are much more effective for the advertiser; they’re much more compelling for the person watching them. CPMs have been up for the last period of time here because of the product-related issues that we’ve talked about; it should be no surprise that CPMs were actually down this quarter. Still feel like more demand constrained and supply constrained when across the service. Twenty percent or so headcount growth/expense growth for this year—those are going against things like rebuilding the ad server, going against coming out with a new version of MAP, things that should help us address the product-related issues that came up over the course of the quarter. Let me give you a couple of examples, which can help them come to life.  The first is we asked people a series of questions before we put you into a timeline when you are new to Twitter. Among the questions, we asked if we can use your device settings to figure out the best ads to show you. It turns out that that setting wasn’t working as expected and we were using device settings even if people had asked us not to do so. So when we discovered that, we tweeted about it, which we often do to try to be transparent with people when things aren’t working as expected. And two, we turned off the setting, so that it would work as expected. That has a negative impact to revenue, because it’s one less input you’ve got, when you are figuring out which ads to show people. So instead of getting a partial-quarter impact, you get a full-quarter impact in the fourth quarter. A second example is specific to MAP, where we typically will share data with measurement partners who will then share with advertisers, so that they can see the effectiveness of their campaigns, not just on Twitter, but across platforms. And another one of the questions that we ask people before we put them into a timeline is if we can share their data with measurement partners. That setting also was not working as expected and we were passing on data, which we have not intended to. So, we stopped doing that, and, although we are working on remediation, there isn’t remediation yet in place, and so the effects of that will continue into the fourth quarter. As you can imagine, the remediation would be sharing aggregated data, as opposed to personalized data when people have asked us not to share their data. So those are two good examples which hopefully helped the issues come to life a little bit, but this wasn’t one thing; there were things that we found out over the course of the quarter and then when you get a full quarter’s impact of them even if you’re working to remediate there can be negative impact to revenue.
  • Snapchat: Revenue increased 50% year-over-year to $446 million. Community grew to 210 million daily active users, an increase of 13% year-over-year. Today, each daily active user opens Snapchat 30 times per day on average. Remain extremely undermonetized relative to audience and engagement and underpenetrated in terms of advertiser budgets. More than 100 Discover channels reaching a monthly audience of over 10 million viewers. Obsessively focused on ensuring ad products are innovative and performant, self-service marketplace is delivering ROI at scale and that team is operationally set up for success. In the U.S., reached 90% of 13- to 24-year-olds and 75% of 13- to 34-year-olds. Extended the maximum length of video ads, allowing advertisers to leverage videos up to three minutes in length. Added this capability to unskippable commercials as well, transitioning to a skippable video after the first six seconds. As an example, for entertainment partners, added new measurement tactics and direct-to-ticketing calls to action so they can not only ascertain how a film is tracking but also how they can directly attribute advertising on Snapchat to ticket sales. Continue to see success from our Shopify partnership, allowing ecommerce brands to reach incremental audiences at scale and efficiently gain new customers. Across beauty, beverage, grocery and more, advertisers are turning to Snap to win the hearts and minds of the world’s 13- to 34-year-olds. Saw cost per impression decline modestly, down 6% sequentially. Continue to have ample supply and lots of room to grow ARPU through both improved sell-through rates and higher yields over time. The way the calendar falls this year, there’s one fewer week of activity between those Thanksgiving and Christmas holidays, and so that’s potential for a headwind. At a high level, looking at TikTok, definitely consider them a friend. They’re a developer partner. With Snap Kit, they’re an advertising partner. Most importantly, the value they provide to their community is very different from the value Snap provides. On Snap Select, continuously hearing from advertisers that they want Snap to win. They’re seeking more options with performant and innovative assets. Snap Select is a cornerstone to the winning strategy.
  • Microsoft/LinkedIn: Saw record levels of engagement again this quarter across the LinkedIn platform. Linked Marketing Solutions remains the fastest-growing segment, up 44% year-over-year, as marketers leverage the community-based tools to connect with LinkedIn. Nearly 660 million members. Continue to innovate across our talent portfolio, including Talent Solutions, Talent Insights, Glint and LinkedIn Learning, to help every organization attract, retain and develop the best talent. LinkedIn Skills Assessment is a new way for members to showcase their proficiency and become more discoverable to recruiters. LinkedIn revenue increased 25% year-over-year. LinkedIn sessions increased 22% as engagement again reached record levels.
  • AT&T: Turner revenues were up on subscription revenue growth, partly offset by lower advertising and content licensing and other revenues, but operating income was up almost 3%. HBO revenues and operating income saw double-digit growth, thanks to strong content sales driven by international licensing. HBO’s third quarter is even more impressive when you consider the DISH carriage dispute and Game of Thrones finale both occurred in the second quarter. Direct customer relationships, we have about 170 million of them across mobile, pay TV and broadband. That number reaches 370 million when you include our digital properties such as, Bleacher Report and Otter Media. As we prepare to launch HBO Max, our direct customer relationships are an asset that any streaming company would love to have. Expect to see significant incremental growth during the planning period from HBO Max and targeted advertising from Xandr. Warner Media, $7.8 billion in revenue, down 4.4% year-over-year, primarily driven by lower Warner Bros. revenues, partially offset by gains at Home Box Office and Turner. Turner, $3 billion, up 0.6% year-over-year, due to a 3.9% increase in subscription revenues, partially offset by a 3.3% decline in advertising revenues and an 11.6% decline in content licensing and other revenues. Turner Advertising: decrease due to lower audience delivery at Turner’s domestic entertainment networks that was partly offset by higher pricing. HBO, $1.8 billion in revenue, up 10.6% year-over-year, reflecting an increase in content and other revenues and a 1.1% increase in subscription revenues. Content increased because of higher international licensing revenues. Subscription increased year-over-year because of digital and international growth, partially offset by lower domestic linear subscribers. Xandr, $504 million, up 13.3% year-over-year; without AppNexus, revenues were up 5% year over year.
  • Amazon: Total sales increased 24% to $70 billion in the third quarter, compared with $56.6 billion in third quarter 2018. Other revenue of $3.6 billion, which is principally advertising, grew 45% this quarter, up from 37%. Very happy with the progress in the advertising business, continuing to focus on advancing advertising experiences there, helpful for customers, helping them to see new products. Want to empower businesses to find, attract and engage these customers, and it’s increasingly popular with vendor sellers and third-party advertisers. So it’s still early; focus at this point is relevancy, making sure that the ads are relevant to our customers, helpful to our customers, and to do that, we use machine learning and that’s helping us to drive better, better and better relevancy. On the advertising side, the opportunity continuing to see some increased adoption. You know one of our areas of focus is expanding video and OTT offerings for brands. It’s still early in this space, but a few things with IMDb TV, live sports, things like adding more inventory through Fire TV apps, IMDb TV, adding more OTT video supply through Amazon Publisher Services or APS integrations and streamlining access for third-party apps and really just making it easier for advertisers to manage their campaigns and provide better results.
  • Facebook: For the third quarter, total revenue was $17.7 billion, up 29%. Mobile ad revenue was $16.4 billion, contributing approximately 94% of total ad revenue. As I indicated on our second-quarter call, we continue to expect a more pronounced deceleration of our revenue growth rate in the fourth quarter. We expect our fourth-quarter reported revenue growth rate will decelerate by mid- to high-single-digit percentage compared to our third-quarter rate. Ad impressions served across our services increased 37%, and the average price per ad decreased 6%. Impression growth was primarily driven by ads on Facebook News Feed, Instagram Stories and Instagram feed. The year-over-year decline in average price per ad was primarily driven by the ongoing mix shift towards geographies and Stories ads, which monetize at lower rates. Now around 2.8 billion people using Facebook, Instagram, WhatsApp or Messenger each month and around 2.2 billion people using at least one of our services daily. Estimate that more than 140 million businesses, mostly small businesses, are using our services each month to grow, create jobs and become social hubs in their communities. Estimate that these ads from politicians will be less than 0.5% of our revenue next year. Now last year, you’d probably remember that we made a series of changes that emphasized friends and family and reduced time spent on our services. The one change removed 50 million hours of viral video watching a day, and we did this knowing that it would mean that people spend less time on our apps. From the biggest brands in the world to the local barber, we are committed to leveling the playing field for businesses of all sizes. We give businesses free tools that previously only the largest companies could access. But we know this is not enough. We also need to ensure that small businesses have the digital skills to use those tools effectively. But on the Instagram shopping product itself, it is still very early days, and we’re working to improve the product, and it’s quite small. We started testing in third-quarter shopping ads, the idea that shoppers can tap on an ad, see a product description page and purchase from the business’s mobile site. Of our more than 7 million advertisers, we already have 3 million advertising across Facebook, Instagram and Messenger Stories. Stories does not monetize at the same rate as a News Feed right now. So, we’re keeping an eye on that.
  • Spotify: For the ad-supported business, revenue growth of 20% year-over-year underperformed our expectations in the third quarter. Roughly 80% of the miss was related to self-inflicted implementation and integration issues we experienced with the rollout of a new order-management software to replace Google’s Doubleclick Sales Manager which was sunset in July. This resulted in a combination of lost orders and underdelivery of other orders totaling about €9 million (almost $10 million) of “lost” revenue. The balance of the revenue shortfall ris elated to a slowdown in programmatic growth from 65% year-over-year in the second quarter to 48% in the third quarter, mostly related to a slowdown in video PMP revenue. Programmatic revenue was sluggish early in the quarter but regained momentum. Podcasting revenue outperformed expectations with strong year-over-year growth but is still a relatively small slice of the total ad-supported business at less than 10% of total ad revenues. We continue to see exponential growth in podcast hours streamed (39% quarter-over-quarter for the third quarter), albeit off of a small base. Podcast adoption has reached almost 14% of total monthly active users. The U.S. accounts for the largest share of podcast streams, but share of listening is higher and growing faster in several European countries. Podcast engagement is clearly a growing global phenomenon. For music listeners who do engage in podcasts, we are seeing increased engagement and increased conversion from ad-supported to premium. Some of the increases are extraordinary, almost too good to be true. We’re working to clean up the data to prove causality, not just correlation. Still, our intuition is the data is more right than wrong and that we’re onto something special. So expect us to lean into our early success with podcasting and to share more insights with you when we’ve established causality.
  • Apple: Make adequate investments in marketing and advertising to raise the awareness of the new products and new services and that is what you’re seeing for example in the guidance that we provided for the first quarter as we’re launching new services right now, and so we’re making investments both in engineering and in advertising to support the new launches. We’ve also expanded the reach of Apple News+ beyond the United States and Canada to readers in Australia and the United Kingdom, bringing together popular publications, such as the Times of London, the Australian and Hello Magazine, in addition to major publications like The Wall Street Journal, The L.A. Times, The New Yorker, People, GQ and much more. We now have 450 million paid subscriptions across the services on our platform compared to over 330 million just a year ago, and we are well on our way to our goal of surpassing the 500 million mark during 2020. We continue to put user privacy at the center of everything that we do, and we know that Apple is strongest when our commitment to diversity and inclusion brings all voices to the table.
  • Google: Total revenues of $40.5 billion were up 20% year-on-year. Once again, our results were driven by ongoing strength in mobile search, YouTube and Cloud. In terms of dollar growth, results were led again by mobile search with a strong contribution from YouTube followed by desktop search. Network revenues were $5.3 billion, up 8% year-on-year, continuing to reflect the performance as primary drivers of growth within network, namely, Google Ad Manager followed by AdMob. Evolved from a company that helps people find answers to a company that helps you get things done. As we’ve often discussed, manage the business for the long term and not on a quarterly basis, and remain very-focused on continuing to enhance the experience for users and advertisers over the long term. On to YouTube. Keeping YouTube safe for users, creatives and partners, while preserving the openness of the platform, is the top priority. This quarter, continued to update community guidelines and enforcement to protect users from harmful content and will keep doing this work. In September, YouTube launched its new fashion and beauty destination called YouTube/Fashion. It’s designed to meet the growing demand from consumers for better ways to explore and connect with some of YouTube’s biggest fashion and beauty creatives. Now, moving on to how we are helping advertisers. We are bringing our strengths in machine learning to help advertisers build their ad campaigns. Machine learning power tools like search autobidding are gaining traction. In fact, more than half of advertisers’ search spend is now optimized via full autobidding. We now have more than 1 million advertisers using responsive search apps, and ad format, we launched a year ago that use machine learning to create the right ad for each search queries. And our new Video Reach campaigns allow marketers to upload multiple video ads into a single campaign. From there, we use machine learning to serve the most efficient combination of these ads to help brands reach audiences at scale. It’s also important for advertisers to have standardized measurement that’s fair across all media and that delivers insights in a way that fully protects user privacy. We are making it easier for businesses to do just that. Our next generation of Google Analytics unifies web and app measurement reporting for the first time to help businesses understand which channel is driving the best result. Headcount was up 6,450 from the second quarter. And, consistent with prior quarters, the majority of new hires were engineers and product managers. So, in terms of desktop, I described it as a solid contributor to revenue growth. And what we see is that desktop does remain an important form factor for certain more complex tasks. So, things like planning vacations or assessing insurance options, what we see is users continue to go back to desktop, notwithstanding the growing utility of mobile. And I think one of the things that we’ve been very focused on is that innovations that benefit mobile also enhance the desktop experience for users and advertisers. Subscription is an area we are different definitely excited about. We are pleased with our options so far across both YouTube Music and YouTube Premium. They’re now available in 71 countries from five markets at the start of 2018. So, we are definitely scaling that up and we’re seeing great traction. YouTube TV is also doing well.
  • Roku: Total net revenue of $260.9 million, up 50% year-over-year. Platform revenue of $179.3 million, up 79% year-over-year. Active accounts 32.3 million, a net addition of 1.7 million over last quarter; streaming hours increased 0.9 billion hours over last quarter, to 10.3 billion. Recently announced an agreement to acquire Dataxu, a demand-side advertising platform. While we work with many leading DSPs and will continue to do so, we believe the Dataxu acquisition will accelerate our OTT advertising road map and enable Roku to provide marketers a single data-driven software solution to plan, buy and optimize their ad spend across TV and OTT. Business momentum and competitive differentiation make Roku an essential partner for content publishers and advertisers. This is evident in the launch of major new streaming services on our platform and by the growth in the number of advertisers who work with Roku. According to eMarketer, around 56 million households in total will have canceled cable or satellite TV subscriptions by 2023. Approximately 1.7 million consumers cut the cord in the third quarter alone. Our own research indicates that roughly 50% of U.S. cord-cutters are Roku customers, and cord-cutters who choose Roku products are highly satisfied with the decision and extremely unlikely to consider returning to a traditional pay TV subscription. During the third quarter, we saw strong unit sales for both Roku TV and players. We continue to lead in smart TV operating system licensing as the No. 1 licensed TV OS in North America. We believe that Roku TV represented more than one in three smart TVs sold in the U.S. during the first nine months of the year. According to Magna Global, OTT accounts for 29% of U.S. TV viewing, but so far has only captured 3% of TV ad budgets. That gap is starting to close. For example, Magna Global forecasted $5 billion OTT ad spend for 2020. We believe that we are well positioned to benefit from this trend. Roku monetized video ad impressions more than doubled again year-over-year. The Roku Channel contributed to this growth as impressions within the channel are growing faster than our impressions within the overall platform. Our ad clientele continues to diversify and now also includes a wider range of small- and medium-sized businesses as well as local, direct-to-consumer, midmarket, performance, programmatic and direct-response advertisers. Average annual advertiser spend is increasing on our platform and we are bringing in new advertisers. This includes strong interest in increasing ad effectiveness with anonymized first-party data and audience guarantees. Our sponsorships business—an ad product within the consumer user experience, such as a home screen takeover—is also growing faster than the overall business. Consumers are reaping the benefits as the biggest and best names in TV programming embrace the transition to streaming. Investment in content is soaring, and free options are proliferating. Just as advertisers are hungry to reach consumers who no longer watch linear TV, they want to measure campaigns and have access to tools that automate them. Roku is well positioned as a neutral party that helps the whole ecosystem build value in OTT. We make it easy for our large and highly engaged TV audience to find the content they love. We are taking the strengths that have made us the leading TV streaming platform in the U.S. and laying the groundwork for enlarging our international footprint.
  • Pinterest: In the third quarter, we saw significant progress in the company. Revenue grew 47% year-over-year; monthly active users grew 28% to 322 million people. Total U.S. revenue was $251 million, an increase of 39% year-over-year. U.S. revenue growth was largely driven by ARPU expansion and also supported by growth in MAUs. Our highest-growth advertisers were CPG and direct-to-consumer businesses. Growth was also driven by small- and medium-sized advertisers. Expanded our international footprint in the third quarter. Global MAUs grew 28% year-over-year to 322 million, driven by double-digit growth in nearly all international countries. Now sell ads in 28 countries, up from 19 at the end of the second quarter. Continue to enhance our products for advertisers, specifically around bidding, targeting and measurement. On bidding, added a video-view objective in August, and already seen very strong adoption by advertisers. On targeting, improved dynamic retargeting to better capture immediate conversions and launched region targeting. Rolled out age targeting to international advertisers (an extension of the age targeting option we rolled out in the U.S. in the fourth quarter of 2018). On measurement, continue to make progress helping merchants integrate the Pinterest Tag into their ecommerce sites. Tag adoption from tag integrations has increased 10 times since May. Launched several SMB-friendly features in the third quarter, including simplified reporting to support Quick Promote, SMB-friendly budget suggestions and an expansion of our ad credit program. Smaller businesses are less likely to have experienced marketing teams, so we launched Pinterest Academy, a free elearning tool we designed for businesses new to Pinterest. It can help businesses get started on our unique visual discovery platform, discover the benefits of all our ad products and leverage our advanced targeting and other features. There are three kinds of generally positive themes that we’re hearing from advertisers. One comes down to sales impact. We’re driving net new customers and new occasions to buy more top-line sales. Second, we hear advertisers are especially excited about insights, especially about early intent and finding early signal on some of the coming end market. Finally, we hear advertisers universally saying that they want to appear on platforms where the general tone is positive. Across the board, we’re also hearing that increase in the number of buying tools and targeting options is making it easier to spend. On the flip side, we see a bunch of opportunities to continue improving our product offering. One on ad expenditure: We want to bring in even more advanced features to manage campaigns, things like custom reporting and simplifying workflows. On the measurement side, want to do more sophisticated measurement modeling like incrementality testing. And on the creative side, we want to make sure it’s easy for brands to bring their creatives on to Pinterest and reduce the amount of bespoke work they have to do to appear on the platform. So those are the major themes in the U.S. This quarter, we increased our SMB offerings. So we added things like click insights to complement the mobile ad manager that we’ve already built, and we’re seeing great traction from advertisers. Two new product areas that we’ve been focused on now and talked about for some time but will scale going forward, they will drive advertiser diversification: shopping and SMB.

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