Behind the Numbers: Meta’s AI Investment Strategy, Snap’s Growth Secrets, and Why Pinterest Deserves More Attention
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Hey gang, it's Monday, February 24th. Minda, Danny and listeners, welcome to Behind the Numbers, a video podcast made possible by Zeta Global. I'm Marcus. Today we'll be checking in on Meta, Snap and Pinterest. We really should be talking about stop signs. Do we need them? Do you ever get used to stop signs, America? Been here for a long time and I still hate them. I like the idea of slowing down for people, but put a roundabout in.

traffic circle. So you like the idea of a stop sign, but what you don't practice? Yeah, I try not to observe them. That's not true. I just think a roundabout safer. Like statistically...

There have been studies apparently, but they're safer. Anyway, I don't think about stop signs that often. That's because you have a life, Minda. Fun fact, I have not driven a car since 2019. Wow. That's great. I hate to drive. I hate driving too. Because of stop signs. That's the problem. Exactly. No fun.

For the discussion, not just about stop signs, but about social media people, we have two people with us. Those two voices you just heard, those two faces that you can see if you're watching us on YouTube or Spotify. We have with us our senior analyst covering social media based in New York. It's Minda Smiley. Hello. Hello there. And we have senior editor of the Marketing and Advertising Briefing based in the same town. It's Daniel Konstantinovich. Hello. Yes, the same small town. Today's fact. Bananas, berries.

Strawberries are not, botanically speaking, which is not how people talk. This one is really distressing. So Stanford University said this, so it must be true. In botany, a berry is classified as a fruit, comes from a single ovary of a flower, has fleshy pulp and contains seeds inside. No pits or thick outer shell to speak of.

then what are we doing with the store brand name? Yeah. I also just can't wrap my head around a banana being a berry. That's crazy. Jill's wrong. Berries got to be small. It's got to be compact. Yeah. Bananas too big. Yeah.

Yeah, that one hurt me too. It really took a lot of wind out of me. Yeah, I already feel bad about this episode. No, no, when you said it, I was just like, oh, that's distressing news, like you said. And yet somehow not as bad as stop signs. Anyway, today's real topic, the social media guys.

All right, folks, we're talking about the social media people, Meta, Snapchat, Pinterest. We'll talk about them all, but we'll start with the biggest one. It's Meta. Two years ago, Meta's revenue growth was dead in the water, believe it or not.

negative 1% for four year 2022. Hard to wrap your head around given how they've been performing the last two years and the few years before that. But that was 2022, negative 1% growth, ad revenue growth, 2023. They spiked to plus 16% year on year. And then in 2024, the social giant achieved 22% growth. So staircase up into the right

quite aggressively the last couple of years slice of pie is what we're playing uh throughout the show uh we'll start with it for meta creating a pie chart as to the three reasons why um meta was able to reach this remarkable rate of ad revenue growth in 2024 minder do you want to go first for us

Yeah, sure. Yeah, I mean, Meta had a great quarter. And I think in terms of, you know, the pie chart, I would say the majority of that, you know, 70% probably just goes to the, you know, can be contributed to the fact that they just have built a very strong ad business. And the AI investments they've made there, whether it's for their algorithms or ad targeting, are just really, just really paying off. And already, you know, Meta was a huge ad business investor.

it has been a huge out of business for quite some time. And I think those investments are just really supercharging that. And then, you know, more broadly, I think we're just seeing more ad spend go to social in general. You know, I know our forecasts are predicting double digit growth for social ad spend. So Meta is, of course, as the biggest player in that is, of course, benefiting from that. So, you know, really, that's that's the big one for me. I think in terms of my other two, you know, slices of pie, I would say some probably can be contributed to, you know,

the TikTok uncertainty we were seeing at the end of last year. You know, that was right before, you know, the uncertainty around the ban. Of course, there's still uncertainty around the TikTok ban, but in December, we really didn't know what was going to happen or how things were going to play out. So I'm sure Meta benefited from that a little bit. And then, you know, kind of going off of that. So I would give that about, you know, maybe...

I'm trying to make sure my math is adding up. Maybe the other 15% would just go to the fact, kind of going off of that, the fact that I do think a lot of creators have been slowly shifting more and more resources to Instagram, even to Facebook, as they sort of prepare for the uncertainty around TikTok. And so I'm sure Meta also saw some tailwinds from that as well. Okay. Danny, how is your pie chart?

Mine looks fairly similar. I have less pieces of the pie, but not because I think that any of the things Minda said are not as important. But I gave the biggest chunk of the pie, like 66% or 70% to all these AI advertising initiatives that the company has.

The AI investments, like Minda said, have definitely helped with targeting and content delivery. But I think something that it has also done that's benefited the company a lot is really opened up a huge pool of spending from smaller brands and advertisers. A lot of the AI tools are aimed at reducing the

barriers to entry in terms of making an ad, making an ad that can run across Instagram and Facebook. You don't have to specify a certain platform. If you have a video ad, it can be repurposed to run on other parts of its ecosystem. I think that's really opened up a whole world of spending that this company is really benefiting from. Yeah, that's a great take.

Yeah, and I think – well, I just said yeah. Yeah, that is a great take. Thank you, Marcus. Yeah, Marcus. Another thing that I have here, which almost could be wrapped up into the AI investments, are developments to Advantage Plus, an ad format that Meta has. They made –

Advantage Plus shopping campaign's a big focus in the last quarter of the year. It overlaps with the holiday season and a big Cyber 5 period. And they saw price per ad jump a pretty significant amount. I think it was 14%. Just shows that there's strong demand for this ad format among retailers or e-commerce brands. Yeah, I think that AI is really helping this company out a lot. Yeah.

Yeah, they sound good to me. And I was just looking at the raw numbers for Meta as well. They're still adding users at an insane clip. In the US, we don't really think of it because it's the US and you've got to hit the ceiling at some point. But the company added...

160 million people to its app. So Facebook, Facebook Messenger, Instagram and WhatsApp, that's half the population of America. It added to its user base in the last 12 months. And so it's not reporting, you know, Facebook users anymore. It never really told us about Instagram users until it hits certain milestones, but it is reporting this kind of family daily active people number, how many people use all of the meta apps and that's still growing at an astonishing rate. So that's going to help push things forward.

It's ads are costing more as well, which is helping the company Q4 2023 Meta's average price per ad had grown 2% year on year. This past Q4, it was up to 14% and the all important US and Canada that's driving that. It was plus 2% a year ago, plus 12% this year. So the price of its ads are helping to boost its revenue as well. What do you guys think of, Daniel, I'll throw this to you first. So Meta's AI spending plans,

Um, good or bad, uh, dear friend of the show, former workmate, Deborah Arho Williamson, founder of and chief analyst of Sonata insights were saying quote Meta's solid revenue growth in Q4 masks, a looming problem. It's revenue outlook for Q1 was lighter than wall street was expecting, and it is planning exorbitant capital expenditures over $60 billion for AI infrastructure in 2025. That adds up to a concerning situation. Close quote. What would you make of it's a planned AI investments?

I'm a little torn on it, I think. It's kind of uncertain how it will play out. I know that I was just saying that its AI investments so far have been a big success for the company, and I definitely think that's true. Before DeepSeek hit the scene and changed the thinking, the math on AI investment. Yeah, I think it's definitely harder for post-DeepSeek for a company like Meta to justify the huge spending on AI. And some of the statements that Zuckerberg made during the earnings call I think are also interesting. He said that the company expects to have a

billion Meta AI users by the end of the year, I believe, which is a huge number. I mean, they could theoretically get to that fairly easily if they just really surface this feature to a bunch of users. They could certainly do that. But I think the bet there is that Meta AI can drive revenue in some way, that it can be a significant ad vehicle. And it's certainly possible, but we haven't

that proven yet, I suppose, and all of these other

user-oriented AI features that are launching at other digital ad companies like Google with AI overviews. We don't really have a sense of how much revenue those features are adding to what the company is already making. Luckily, net income is doing good things for them. So that's probably calming things down on one side whilst terrifying investors on the other with these kind of investments in CapEx. Net income, $21 billion.

billion in Q4 in just pure income. And that's high, but it's 50% higher than the previous year. For the last five quarters, it's kind of been hanging out in the 12 to 15 billion range. So this is a market kind of step change going up above 20 billion for the first time in a while.

Yeah. If I could just say one more thing about Meta AI, you know, I think it's important to clarify that this spending is not all going to the AI assistant. I'm sure, you know, it's going to be spread across the company and there are, you know, they are communicating things about their goals with Meta AI that I think are important.

Setting up the idea that it will be eventually a strong vehicle for advertising They've talked a lot recently about how this assistant will have like a deep memory and will store You know the conversations it has with users like very specifically and

If they can get users to engage with this as much as the company is hoping that they will, that personal assistant will have theoretically a lot of intimate knowledge or data around specific users that can make

a good place to target ads. But as a counterpoint to my own point, the question is, if you're asking this assistant for recommendations or for help or whatever, and it's delivering you sponsored results, does that reduce the utility and desire to use this feature? Like it's a careful balance to walk in. We haven't seen any company

come out on the other end of that yet. So, you know, like Minda said, it is very abstract. It's just hard to picture what the end result there looks like. Yeah. Yeah. Playing devil's advocate with yourself. You're all over the place, Danny, but great points. Let's move to Snap. Last year, Snap's revenue growth was also dead in the water. 0% for year 2023.

This year, it grew 16%. So again, quite a turnaround. Slice of pie, Mindy, I'll start with you. Again, creating a pie chart, three reasons, Max, why Snap was able to bounce back in 2024.

Yeah, for sure. I mean, I would say about 60%, you know, definitely majority just goes to the fact that, you know, they've been working on strengthening their ad platform for quite some time and it is paying off clearly. I mean, they saw double digit revenue growth. And so I think that's a big, big part of it, especially when it comes to small businesses, especially when it comes to lower funnel. So I think, you know, just the fact that they've really been investing is a big reason why we saw that jump. I also think Snapchat Plus, you know, it's still a small part of, you know,

of their mix, but they're certainly seeing a lot of momentum there. I want to say that they said that they're expecting an annualized revenue run rate of 500 million, which, you know, for Snapchat, that's not small potatoes. So, you know, I think it's kind of a slow burn, but I think they are really seeing some success there with Snapchat Plus and they're investing in it. And I think we're going to see, you know, we're seeing growth, revenue growth from that, and we will continue to see more in the future. And I think, so I would give that about, you know, probably 25%.

in terms of just why they saw some growth this year. And then I would say the rest probably would go to just the fact that they've invested, you know, Snap's an interesting one. It feels like they always are rolling out a lot of ad formats. They seem to have a really experimental kind of test and learn mindset. They are constantly rolling out new ways for advertisers and brands to jump in. Creators as well. They've definitely been investing in creators, especially in light of the TikTok stuff. So I think they're just, you know,

but they've been able to attract brands in that way as well. Danny, what about yours? Yeah, I have a similar split. I think I attributed about 50% to, you know, I could probably split this 50% into two 25s because I have two things. I have an and joining,

something else with this 50%. So one of those is like Minda said, focusing on smaller businesses and down funnel clients. You know, Snap said at some point in the second half of the year that and which is something that a lot of companies said

that they are focusing less on these like big you know top of funnel clients who have a lot of competition for spending uh and can be pretty volatile you know like the biggest of the big name brands that you or i could think of and they're really trying to open the platform to a wider pool of marketers which

just leads to more consistent spending. I think that's definitely benefited the company. So I give that about 25% if I'm splitting my 50 in half. And then the other 25%, which is something that I think is also interesting about the next company that we'll talk about, is...

Snap is just, you know, really trying to lean into its own unique, distinctive qualities as an ad platform, I think, with things like, you know, AR marketing and sponsored lenses, things like that. A lot of new ad formats, like Minda said. I think that something that these sort of second tier of social platforms have really learned is that

It's really hard for them to go toe-to-toe with Meta, and if they can offer something that is really distinct, they can benefit from that and carve out a unique and consistent place in marketers' budgets. The threat to that, I suppose, is that there's nothing stopping Meta with its enormous amount of money.

from copying any feature that really takes off and starts to grow rapidly, although they have already committed to spending a ton of money on AI. So maybe their ability to copy and be flexible like that is a little more limited. We talk about them in the same breath, but I mean, Snap according to our numbers, sorry. Yeah, Snap according to our numbers is like 20 plus times smaller than Meta. Snap actually is the 12th largest company

digital ad player in the list of ones that we track. LinkedIn makes twice as much money in ad dollars than Snap. So we talk about them a lot and they make the headlines a lot. They're very innovative company. They're a social player. So that's why we talk about them alongside folks like Meta. But they're in a different grouping almost. And so they have to

behave that way. You know, they have to try to do all they can to get some attention and to make sure they're still part of advertisers' budgets. The three things that jumped out to me quickly with Snap from digging around in their financials. So North America average revenue per user was very strong. That was up 10% year on year in Q4. So that was huge. The second thing, which is probably I buried the lead here because the second thing is huge. International users are the story for Snap.

And they've been so for two and a half years now. Because if you look at the user side,

Snap hit the ceiling for North America users back in the summer of 2022, if we can remember that far back. Since then, they've added no more North American users, but at the same time, they've added 100 million rest of world users. So folks outside of North America and Europe on the revenue side, that's translated to 25 to 30 percent international revenue growth each of the past three years. Now accounting international revenue accounts for 20 percent.

their total, it was up from 14 a couple of years ago. So that's a huge part of the story. And then thirdly, Snap has made the first quarterly profit in Q4 in three years, which is huge. Yeah. The other 50% of my pie was split between Snapchat Plus and international users, which are definitely linked. I mean,

A ton of the Snapchat Plus subscriptions are coming from markets like India. And I mean, I have been very surprised to see that this has grown so consistently quarter after quarter. Messaging apps like this are notoriously difficult to monetize, which you can see in Snap's own previous struggles in 2022, I believe, to your point.

Remember, Meta and Snap and so many social platforms were reeling from the Apple tracking changes that really reduced their limit to target ads and forced these companies to rethink their advertising businesses or diversify their revenues. And Snapchat Plus came out of that. And I certainly remember at the time thinking like,

Is anyone really going to subscribe to a paid version of Snapchat? What benefits could they add to that to really drive subscriptions? But it appears to be working for them, and I'm sure it's something that they're going to cling on to very tightly as long as it grows. Yeah.

So that's Snap, as I mentioned, the 12th largest. So a lot of other folks making more in ad dollars than them. One of them is Pinterest. Pinterest is a company we should probably be talking about more. Minda, I'm curious to know what you think of that statement because they've been making more, Pinterest, more in ad dollars than Snap for the last seven years, according to our figures, which I was surprised.

shocked to learn when I went back and looked in summary in terms of how they've been doing more recently full year 2024 revenues for Pinterest were up nearly 20% global monthly users were up over 10% so Minda yeah what do you make of just the conversation around Pinterest and how we kind of speak about them versus Snap and then also what jumps out to you about Pinterest and their most recent performance

Yeah, I know. It's funny. I think you're right. I mean, I feel like Snap does a good job at maybe making a lot more noise than some of these other second tier platforms. Because yeah, they actually are pretty small when compared to some of these other platforms. But I think just because of, you know, historically within the social landscape, they pioneered a lot of things and they've just, you know, kind of been able to keep that reputation. But yeah, they are quite small comparatively. In terms of Pinterest though, yeah, Pinterest is

super interesting. I think, not to sound like a broken record, but I think they're benefiting from a lot of the same things that the other ones are benefiting from, namely lower funnel, focusing on those lower funnel goals that are really appealing to advertisers, of course. And then the fact that they have a unique position within the social commerce landscape because they're kind of seen as a place where people go for inspiration, for product recommendations and whatnot.

So, yeah, they certainly have kind of their own little lane there. And then I also think one thing that's interesting about Pinterest, they're kind of leaning into this idea of them. I don't know if social listening platform is the best way to describe it, but like I think they they they.

They really have put a lot of resources into like positioning themselves as like these like culture forecasters almost, you know, every year they do this big push around like here are the trends we think are going to be big next year based on our searches. And it's always really fun stuff like cherry red is going to be a huge color and like pickles are going to be on cupcakes.

Like it's always like silly kind of fun stuff. But I think that is really valuable for a lot of marketers. And I think that is a play, you know, Pinterest does have a lot of data that can help kind of forecast some of those trends. So I know that's a little bit abstract in terms of how it ties to their ad revenue, but I do think it plays a part. No, absolutely. I mean, Danny, our colleague, Jeremy Goldman, who's with you on the briefings, he was saying Pinterest is evolving into a product discovery engine, giving brands a more intent transformation.

driven alternative to social media ad platform. So I think it's kind of ties into what Minda's saying. It's not social media in the traditional sense and advertisers starting to really pay attention to that. Yeah. And I think, you know, Minda's definitely right that they have carved out a unique niche in social commerce. And as social commerce continues to grow in the US, thanks to

in large part, efforts at TikTok shop. Pinterest will definitely benefit from a runoff of that, I think. And like I said with Snap, this is a company that's definitely leaning into its unique qualities as a product discovery platform to drive growth. And it's really focusing on that. I think something that is kind of interesting and that it warned about in its earnings call is that

They still appear to be fairly reliant on Google search traffic, which is definitely something you can say of some other platforms like Reddit. But they said that the changes that Google is making to search with generative AI and whatever else could pose a threat to its business. So I think the fact that they called that out maybe is a sign. I mean, correct me if I'm wrong or if you think differently, but maybe it's a sign that they're struggling to –

generate consistent organic traffic that a lot of people are coming to the platform from an outside source first and not just going to Pinterest naturally when they're looking to start a shopping journey. Yeah. Yeah. It's an interesting point. Really interesting point. That's where we have to leave the conversation, unfortunately, gang. But thank you so much for your time and talking about some of the social folks with me. Thank you first to Minda.

Thank you. Thank you to Danny. Yeah, thank you. Yes, sir. And thank you to the whole editing crew. Victoria, John Lance and Danny Stewart runs the team and Sophie does our social media. Thanks to everyone for listening in to Behind the Numbers, an e-marketer video podcast made possible by Zeta Global. Tune in Wednesday for the February edition of the Retailer Rankings episode with your host, Sarah Lebo.