Marcus Johnson (00:04):

Hey, gang. It's Tuesday, September 2nd. Minda, Jasmine, and listeners, welcome to Behind the Numbers EMARKETER Video podcast. I'm Marcus, and joining me for today's conversation, we have two social media folks. Is that the right date? We were off yesterday. Yes. Hope you had good off weekend. Apparently I need another one. Senior analyst living in New York, Minda Smiley, welcome.

Minda Smiley (00:31):

Hey, how are you, Marcus?

Marcus Johnson (00:32):

Very good. Well, I'm fine. As you can see, it's a rough start. How are you?

Minda Smiley (00:38):

I'm doing well, doing well.

Marcus Johnson (00:39):

Very good. Welcome to the show.

Minda Smiley (00:40):

Thanks.

Marcus Johnson (00:41):

We also have VP and principal analyst, hanging out in LA is Jasmine Enberg.

Jasmine Enberg (00:45):

Hey, Marcus. Hey, everyone.

Marcus Johnson (00:47):

Hello there. Today's fact. So I have another one about Pittsburgh.

Minda Smiley (00:58):

Amazing.

Marcus Johnson (00:59):

Well, however, it's about sports.

Minda Smiley (01:06):

Oh, not my strong suit.

Marcus Johnson (01:06):

Still with me? No, lost you already.

Minda Smiley (01:10):

But here we go.

Marcus Johnson (01:10):

Okay.

Minda Smiley (01:10):

We'll try.

Marcus Johnson (01:10):

Well, it's a very rich sports history. So I'm wondering if I can turn you into a Pittsburgh sports fanatic by the end of these three facts about Pittsburgh sports. Jasmine, hockey fan, played some tennis, other sports?

Jasmine Enberg (01:28):

In terms of team sports, that's about it.

Marcus Johnson (01:31):

That's all. Okay. Why? What individual sports?

Jasmine Enberg (01:33):

And soccer.

Marcus Johnson (01:34):

Oh, soccer.

Jasmine Enberg (01:35):

Not play.

Marcus Johnson (01:38):

Very nice. Well, these are about the Pittsburgh teams. Number one. The Pittsburgh Steelers football team have won six Super Bowls, which is tied for the most in NFL history. Same number as the New England Patriots, which get a lot of credit because of Tom Brady and him being the GOAT, and all the rest of it. But Pittsburgh have the same number, which is amazing.

Minda Smiley (02:00):

I actually did know that. Stairway to seven, baby. Let's go.

Marcus Johnson (02:02):

Hello. Okay.

Jasmine Enberg (02:03):

Yeah. Yeah.

Marcus Johnson (02:05):

Okay. Steel curtain. Number two, Pittsburgh was the first city to hold the Super Bowl, World Series, and Stanley Cup titles all in the same year, '79 to '80.

Minda Smiley (02:17):

I did not know that, but that's before my time.

Marcus Johnson (02:19):

Impressive, indeed. And then lastly, this is the best one. All three major teams, Steelers football, Penguins hockey, and Pirates baseball, wear black and gold, making Pittsburgh the only U.S. city where all pro teams share the same colors.

Minda Smiley (02:37):

Yes. Yeah. That's true. I always thought it was odd that other cities have different colors for each sport.

Marcus Johnson (02:41):

Yeah.

Minda Smiley (02:42):

I actually think it makes a lot of sense that we're aligned in that way.

Marcus Johnson (02:44):

What the hell's going on?

Minda Smiley (02:44):

I don't know.

Marcus Johnson (02:47):

Could you sort that out, please? Some uniformity.

Jasmine Enberg (02:49):

What's the meaning behind black and gold?

Minda Smiley (02:51):

That's a good question. I don't know why black and gold are the Pittsburgh colors, but it's very consistent.

Marcus Johnson (02:59):

I'll look into it. I need something for the next episode next time.

Minda Smiley (02:59):

Next time. A third Pittsburgh fact.

Marcus Johnson (03:01):

Exactly. Anyway.

Jasmine Enberg (03:03):

I'm a little jealous, Marcus, I haven't heard any Finland facts in a long time.

Marcus Johnson (03:06):

I'm sorry. If you had your share. I'm sorry. I can't find any. I'll keep looking. Anyway, today's real topic, the Social Platforms Not Called Facebook, Instagram, or TikTok. All right. It's time to check in on the smaller social guys, Pinterest, Snap and Reddit. We'll start with Pinterest. There are a few stories coming out of the Pinterest camp. One, our Jeremy Goldman writes that Pinterest GenAI tools, like auto-collages and Performance+, helping advertisers scale creative output and improve engagement with the social platform saying users saved AI-generated collages twice as often as standard pins during testing.

(03:52):

Number two. Our gorgeous ability explains that over one third of Pinterest's near 600 million global users are men, 30% in the U.S. driven largely by Gen Z. Their search is spanning fitness, grooming, parenting and finance, upend stereotypes and signal new ad opportunities. And story number three, Rachel Wolf, our Rachel Wolf notes that Pinterest is partnering with Instacart to advertise power their campaigns using Instacart's first party data, a move that will enhance the value of both companies' ad platforms while advancing Pinterest shoppable ambitions. Jasmine, what's the most interesting development at Pinterest? Recent AI efforts, the shifting user demographics or partnering with Instacart?

Jasmine Enberg (04:32):

What I think is most interesting actually is to look at all of these developments together. And so when you do that, there's this really clear picture that Pinterest is really trying to deliver on its ad business on all fronts. So it's building a suite of AI-driven features for both consumers and for advertisers. And it's also launching really smart partnerships that speak to its differentiating factor, which has always been that people who come to Pinterest are primed for shopping. That's not necessarily the case on other social platforms.

(05:05):

I think Pinterest has also done a really good job of positioning itself as a safe corner of the internet. And I think that's also a big reason why they released the Men's Trend report where you got those statistics about 30% of its user base now being male, as well as the Pinterest Manhub, which helps advertisers reach those male users on the platform. That positioning, of course, isn't new and on its own, it isn't enough to drive the kind of user and sales growth that we saw last quarter, but I think combined with these other business developments, Pinterest is in a really good place right now.

Marcus Johnson (05:43):

Does one stand out more than the others for you, Minda?

Minda Smiley (05:47):

Yeah. I'm actually going to go completely off script here and say-

Marcus Johnson (05:51):

Huh?

Minda Smiley (05:51):

... Yeah, I think their ad tech ambitions are pretty interesting. I know that's not the sexiest thing to bring up on a podcast, but they are certainly striking a lot of partnerships within the ad tech space that would really help them scale in terms of advertising. So that's certainly something to watch from a marketing perspective. But as to what you actually asked, I am pretty aligned with Jasmine. I think the AI, they certainly are rolling out AI features across all aspects of the business. Consumer facing, search, commerce, actual ad formats, there's a lot there. I know that AI slop was a big concern for them this year. It does seem to be something they've taken steps to address. And, of course, AI slop is an issue across all the platforms. And so I think that is an issue.

Jasmine Enberg (06:38):

The ad partnerships, Minda, is such a good point and it's something that Jeremy called out in the article that you mentioned, Marcus, too, that analysts in particular are really optimistic about these partnerships and part because it helps Pinterest to compete with much fewer overhead costs. And so it's clear these smaller social platforms, of course, don't have the pockets, as deep pockets as say, Meta. So finding more creative ways to be able to scale their businesses is crucial for them.

Marcus Johnson (07:09):

Yeah. Let's move to Snap. As you can see from this chart on the screen, if you're watching us close to half of buy-side, decision makers expected their organizations to focus at least somewhat on attention metrics according to the IAB. Marissa Jones notes that Snap is looking to be a leader in a metric that advertisers are increasingly paying attention to, but on the back of a lukewarm quarter, can Snap's emphasis on attention help it bounce back? Minda, can it?

Minda Smiley (07:44):

My take on that is I think Snap's issues right now are much bigger than something like an attention metric. I think it certainly maybe could be part of how they bounce back, but I think a lot of the issues plaguing them right now are a little more existential in terms of where they fall within the social media mix, where they're seeing some issues in terms of users. That's not to say they don't have momentum. They definitely are getting ahead of a lot of their challenges right now with hires in particular. I know they have a new head of sales in North America. They just promoted someone to a CMO role. So I certainly think Snap is aware of some of their issues right now. But yeah, I think it's going to take a lot more than one specific thing to help them get there.

Marcus Johnson (08:33):

Yeah. Jasmine, there's mixed signals coming out of Snap at the moment. Look at their recent earnings, revenue growth struggling. Snap grew revenue 9% a year over year in Q2 reaching 1.3 billion. It's the slowest growth in over a year, but they did point to a technical ad platform issue. They briefly let it run as a discount. So maybe that's to blame for it. However, on the other side, engagement growth is doing well. Daily active users up 9% year over year. It's nearly 470 million with monthlies up over 900 million and time spent also up with Spotlight content. So what's your read on Snap and whether attention is the thing that's going to get them to be able to bounce back?

Jasmine Enberg (09:16):

I think mixed signals is a good way to put it. And to Minda's point, Snap really is pulling out all the stops to get advertisers to spend, but it's working against longstanding really structural issues with its business. And that includes things like its small size relative to Meta, which is its main competitor, its core use case as a messaging app. And now there's also indications that Gen Alpha isn't signing up for Snapchat the way that Gen Z and millennials did. And I think that that probably contributes to the weakness that we saw in North America daily active users in Q2. I know you pointed out the overall daily active user growth and monthly active user growth, which was really strong, but it actually declined in its core market.

(09:59):

And I think one persistent problem for Snap has also been a lack of consistency in this really competitive market that we're in. So it's been working really hard, of course, to revamp its ad platform, and there are signs that some of that work is paying off. We've seen an increase in the number of advertisers. There's also, or direct response advertising has been driving a lot of its growth. But you mentioned that ad glitch that it had in Q2 and investors really were not forgiving of that, and I think that shows that you really can't make mistakes in the current environment.

(10:34):

One other thing that we haven't talked about a lot and that I've been thinking about a lot recently is how vocal Snap has been recently about their AR spending. And so on the one hand, cumulatively spending $3 billion on AR is not a lot. I mean Meta loses more than that on Reality Labs every quarter, but it also seems a little bit out of touch given that we know Snap's ad business just isn't keeping pace with the rest of social media. And investors and advertisers are really looking for more innovation in AI than they are in AR right now. Now that's not to say that Snap should abandon this. It's made AR such a core part of its strategy, and it's not the only platform or company that's working on AR initiatives. Meta is too, but again, it has much deeper pockets and its ad business has been on a tear.

Marcus Johnson (11:28):

Yeah. And because of that it's on a much shorter leash. The company's net loss grew to over 260 million in the quarter. So whereas Meta is turning a significant profit each quarter. They just don't have the time or the money to be wasting any of these dollars. Let's move on finally to Reddit, final social platform of the day. Our Jeremy Goldman again was noting that Reddit delivered a breakout Q2 posting ad revenues close to $500 million up over 80, 8-0% year over year. Global daily active uniques were up over 20% to 110 million with U.S. uniques up over 10%. That makes Reddit's U.S. average revenue per user growth go up by over 60% year over year, "a sign of improving monetization efficiency," he writes.

(12:24):

But Jeremy suggests that the bigger question is whether Reddit can consistently shift advertiser perception saying that, "It excels by servicing high intent users and community insights but remains underweighted in many media plans." As Jeremy inquires, "Can it earn a permanent seat at the table for bigger brands budgets?" Jasmine, If yes, why? If not, what is holding it back?

Jasmine Enberg (12:48):

So I want to zoom out a little bit before I answer your question if that's okay, because I find Reddit endlessly fascinating.

Marcus Johnson (12:55):

Okay.

Jasmine Enberg (12:55):

And part of that is because it is so paradoxical. So if you think about Reddit from an advertiser perspective, it is becoming one of the strongest AI-driven social ad platforms. From a consumer perspective though, it's one of the few places where you can still get real world human interaction at a time when social media feeds are being filled with creator content and AI slop. And Reddit itself has positioned itself as being anti-creator and anti-influencer, though not anti-influence, which is something that Jim Squires, who's the EVP of business marketing and growth at Reddit, told me at Cannes earlier this summer.

(13:35):

And Reddit, of course, has also leaned in really heavily into the user-generated commentary and community and its pitch to advertisers. And I say all of this because it's also not lost on me that the reason Reddit has been able to build such a strong AI foundation, even with its small size in the social ad market, is because of all of this human-led influence that's happening on the platform. If you think about all the product discussions, the reviews and recommendations, and all of that actually forms one of the most interesting ad products that it's launched recently, which is called Community Intelligence I believe.

(14:12):

So to your question then, I don't know that I can say for certain whether Reddit will earn a permanent seat at the table for bigger brands, but it certainly has carved out a corner of the proverbial table that I think speaks both to the advertiser demand for AI-driven products as well as the consumer need for more human-driven content. And that is a balancing act that I haven't really seen a lot of social platforms navigate as successfully.

Marcus Johnson (14:42):

Yeah. To that point, there are very unique conversations happening on Reddit as people discuss, like you mentioned, things like products, reviews about things. Dan Gallagher of the Journal was noting Reddit's been proving to be a more attractive draw for advertisers looking to engage, looking for an engaged audience that is often focused on commercial subjects saying such as users seeking opinions on what products to buy. Dan Salmon of New Street Research estimating around 40%, 4-0% of all conversations on Reddit have commercial relevance, creating a sweet spot for the company in the consideration phase of shopping the ask call notes. Minda, can they get a seat at the table permanently?

Minda Smiley (15:26):

Yes. I think my answer would be it depends, and I know that's a very annoying answer, but I do think it-

Marcus Johnson (15:32):

We'll take it.

Minda Smiley (15:33):

... is a bit nuanced. I do think that they are, I think in some ways, yes. Advertisers are certainly more interested in Reddit than they ever have been before in my opinion. Anyone who knows me or has talked to me in the past year has probably heard me go on and on about Reddit. I've been particularly optimistic about the platform. I'm sure I've talked about it on this podcast. So yeah, there's certainly momentum there. The vibes are good for Reddit and aside from just vibes, they're rolling out a lot of features, a lot of products for advertisers right now, especially since they went public. But I do think when we actually talk about budgets that it really only is one element of this conversation.

(16:08):

I think a lot of brands are actually, at least right now in the short term, probably more focused on organically how they can get onto Reddit that... Because it is a platform that isn't like other platforms, it's not a plug and play. They might be incrementally increasing how much they're putting toward it from a budget point of view, but I think a lot of them are more just getting a little more familiar with the platform from an organic perspective, just trying to figure out if and how they can even make their way onto it, because it is a very different beast from the other platforms. And so it'll be a little bit of a slow burn, I think.

Jasmine Enberg (16:43):

And I think advertisers also need to be careful from the consumer perspective, right? People on Reddit aren't as receptive to ads as they might be on other platforms just because they haven't been there in the same way they might've been on an Instagram feed or on a TikTok feed. Not saying that consumers like ads there either, but I think as they're building out their strategies, they do need to think more critically and strategically about how they show up there. And I think that's part of what's pushing them more towards building this organic presence first before introducing paid placements.

Minda Smiley (17:19):

Exactly. One example I like to point to, and I feel like it's like the go-to example is Sonos. Keith from Sonos is an employee who is pretty engaged within that subreddit. People have come to know him and respect him over the years. And so that is just one way a company has been able to crack Reddit, I guess you could say, with this employee that has just been able to gain trust within a subreddit dedicated to this company. But again, that took a long time. I don't know exactly how long he's been doing that for, but it didn't happen overnight. It wasn't one ad that changed the game. So a lot of these strategies I do think are going to take a bit more time and a little bit of creativity as well.

Jasmine Enberg (17:57):

And from Reddit's point of view, one of the things that I've been thinking about a lot too is all of that data and information that it has on its platform. Marcus, correct me if I'm wrong, but did you say 40% of conversations on Reddit now have commercial relevance?

Marcus Johnson (18:14):

Yes, according to New Street Research. Yep.

Jasmine Enberg (18:15):

So that's not just relevant for advertisers and marketers that want to advertise on Reddit or show up on Reddit. It's relevant to their bigger marketing plans, right? And so I think what Reddit has done really smartly, especially with Community Intelligence, is package that all up into a product for brands that they can use, not only to inform their strategy on Reddit, but more broadly across multiple different platforms and different channels. If you're tracking consumer sentiment and interest and the conversations that are happening on Reddit, that's really good way to guide how you're positioning your product to consumers overall.

Marcus Johnson (18:56):

Yeah, yeah. Let me throw this at you both quickly before we wrap up. So my question here is, is Reddit able to grow revenue from licensing its content to AI companies more? Because most of the company's revenues come from advertising, but its other revenue is mostly comprised of licensing deals once it's struck with OpenAI and Google, which accounted for about 7% of total revenue in Q2. However, there's recent data from SIMRA showing that Reddit is incredibly valuable to AI companies coming in as the clear number one most cited website by AI models with a citation frequency of 40%. Wikipedia was a very distant second with 26%. Another recent report from search analytics company ARFs showed Reddit appearing in over 5% of Google's AI overviews responses the most of any source. So can they lean more on licensing? Can you see it being a more even balance between licensing and advertising revenues? Is that a path for Reddit?

Jasmine Enberg (20:00):

I think it should be. One of the things that we've talked more broadly about is the fact that these smaller social platforms really do have to diversify their revenue streams. Snap, to its credit has made really good strides with SnapChat+. I think licensing for a platform like Reddit, as well as X, could become a viable revenue stream in the future if they do it right. And so yes, I see a lot of potential there. It is really valuable information, absolutely.

Marcus Johnson (20:32):

Yeah. We see Reddit, even though there's potential more potential in licensing perhaps. We do see Reddit as a billion dollar a year business in terms of ad revenue starting this year, getting close to $2 billion in annual revenue per year in just a couple of years, which is like 20 to 30% per year growth. So advertising is definitely there and growing very strongly, but still a very small base. And maybe there's some extra dollars to be found in the licensing space, assuming that these models continue to pull data from Reddit and maybe not some of these other sources. I think it was Wikipedia and I think YouTube was third, and then some other social platforms a little further down as well. That's all we've got time for this episode. Thank you so much to my guests. Thank you first to Minda.

Minda Smiley (21:17):

Yeah. Thank you.

Marcus Johnson (21:19):

And, of course, to Jasmine.

Minda Smiley (21:20):

Thanks so much.

Marcus Johnson (21:21):

And thank you to the whole editing crew and to everyone for listening into Behind the Numbers, EMARKETER Video podcast. Make sure you subscribe and follow. Leave a rating and review, if you have a moment, please. And tune tomorrow where I'll be guest hosting the Reimagining Retail show as we check in on everything that's been going on with Target.

(21:35):

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