Digital ad spending is on the rise, with platforms like Google, Reddit, and Snap showing strong Q3 earnings as brands ramp up campaigns for the holiday season and U.S. election cycle. This growth highlights the power of major digital platforms in driving brand visibility. As platforms innovate to attract advertisers and increase ad engagement, smaller businesses face growing challenges in keeping up. Looking ahead, the final quarter of the year promises continued momentum in the digital ad space, with both opportunities and obstacles for advertisers big and small.
Strong Q3 for Digital Ad Sellers
Strong Q3 earnings from Google, Reddit, and Snap reveal rising ad spends from brands in anticipation of the holiday season and ongoing U.S. election cycle spending. Gil Luria, Head of Technology Research at DA Davidson, points out that these trends suggest resilience in the U.S. economy, with Alphabet, Reddit, and Snap poised to collectively add over $110 billion to their market cap. This optimism extends to other platforms, such as Meta and Pinterest – which have already posted strong Q3 earnings reports or are expected to.
Reddit’s Explosive Growth
Reddit saw its ad business thrive in Q3, with revenue up 68% year-over-year, reaching just over $348 million. Ad revenue for the quarter hit $315.1 million, a 56% increase year-over-year. This notable growth has sent Reddit’s stock price up by 20%. Reddit’s aggressive expansion of ad slots — displaying more ads between comments and posts — is a clear play to boost revenue, in line with the platform’s strategy to maximize impressions. It is worth noting that, anecdotally, Reddit users say they experience repetitive ads – which could be due to a lack of impression capping. This would be very beneficial to Reddit, but poses problems for performance marketers.
The potential for continued growth is significant, especially as Reddit explores AI-driven solutions for global expansion, potentially using AI to localize U.S.-centric content for international audiences. The use of AI to scale its platform could place Reddit in an even stronger position within the global ad market.
YouTube: A Powerhouse in Ad Revenue
Alphabet’s YouTube saw its ad revenue rise 12.2% in Q3, reaching $8.92 billion. While YouTube’s ad revenue does not include earnings from subscriptions like YouTube TV or NFL Sunday Ticket, the platform’s growth has been impressive. Analysts initially predicted a figure around $8.89 billion, but YouTube exceeded expectations. YouTube’s recent iOS consent prompt update has also likely attracted performance marketers who now find it easier to track user data on the platform, no doubt playing a role in significantly boosting advertiser engagement on iOS.
The popularity of creators, including those like MrBeast, points to a future where YouTube’s reach could only expand, especially with performance-driven ads becoming more effective. Upptic CGO Warren Woodward notes that the platform continues to be a “monster,” with vast potential as a dominant advertising channel.
Challenges for Smaller Advertisers
As ad spending increases on major platforms, smaller businesses face significant challenges. Increasing ad costs, driven in part by seasonal factors and the consolidation of advertising power among large players, risk sidelining smaller companies. Upptic Marketing Director Xander Agosta notes that the entry of AI-based ad solutions may add competition but may also remain in the hands of the biggest players, leaving little space for smaller entities.
Looking Ahead: Holiday Season and Election Spending
With the holiday season and election cycle in full swing, Q4 is expected to bring heightened ad competition, especially for digital platforms. Warren anticipates that these factors will continue to push up ad prices, leading to a strong close to 2024. For larger companies and advertisers, this environment signals growth and opportunity, while smaller businesses may need to explore alternative strategies or niche platforms to stay competitive.
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