PQR: The Drop’s Quarterly Review of Platform Trends & Themes Q1: 23

by | Mar 23, 2023 | Feature

2023 is already shaping up as a pivotal year for social media platforms. Will TikTok be banned in the US? Will Elon Musk manage to revive Twitter’s fortunes? Can YouTube creators make money out of Shorts? In The Drop’s first Platform Quarterly Review (PQR), we look over some of the key platform headlines from the first few months of the year.

TikTok: boom or ban?

Insider Intelligence reckons TikTok will end 2023 with 834m monthly users – rising to 955m in 2025. Seemingly unstoppable, the platform is expected to command 37% of all online video ad revenues by 2027 (Omdia). That’s more than Meta and YouTube combined. The biggest threat to TikTok is US and European regulators, which are suspicious about the platform’s Chinese ownership (and links to government). This could result in a ban in key ad markets, which would impact Omdia’s figures. TikTok is currently engaged in a charm offensive to counter the negative narrative building up around it. In terms of product development, Q1 2023 saw TikTok launch Series. Positioned as a premium, paid-for product, TikTok calls Series “a new way for creators to share their stories, talents and creativity while further deepening their connection with the TikTok community.” The new feature is interesting for two reasons. Firstly, because it takes TikTok into the subscription business. Secondly, because Series is the first time TikTok has opened the door to content more than 10 minutes in length.

YouTube: from shorts to social commerce

YouTube reported an 8% drop in ad revenue for Q4, 2022 to $8bn – the result of a downturn in the economy. There was better news in terms of audience, however, with YouTube Shorts hitting 50 billion daily views. This is important, because Q1 saw the platform switched on monetisation for its short form content ecosystem. As yet, there is not much official information about the impact of YouTube Shorts monetisation – but several creators have shared their results to date. So far, it looks like creators are earning around 3-4 cents per 1000 views. This doesn’t translate into very much – with millions of views generated a few hundred dollars. It’s early days, of course, so it will be interesting to see how this changes. Aside from Shorts, the company has identified connected TV, subscriptions and social commerce as key growth areas.

Facebook: not dead yet…

The narrative in recent times has been that Meta-owned Facebook is only for old-timers. But Facebook chief Tom Alison recently reported that the platform “reached a major milestone: 2 billion daily actives — the highest it’s ever been. Contrary to reports otherwise, Facebook is not dead nor dying, but alive and thriving”. The stock market seems to be in two minds. For much of 2022, Meta’s share price was in decline. But it has recovered a lot of ground in 2023, mainly because Meta CEO Mark Zuckerberg has promised to double down on efficiency and profitability. Alison says that Facebook’s focus this year is on “artificial intelligence, messaging, creators and monetisation”. Like YouTube, Facebook is desperate to counter the threat from TikTok by pivoting towards shortform – via its Reels product. Currently, says Alison, more than 140 billion Reels plays across Facebook and sister platform Instagram each day. According to Alison: “Over the years we’ve built one of the most robust monetisation offerings of any creator app so that creators can earn money in ways that make the most sense for them. This year, we’re focused on adapting and enhancing these tools for short-form video.” Q1 2023 also saw Facebook launch Reels of up to 90 seconds in length. Until now, Facebook Reels have been limited to 60 seconds.

Instagram: the reel deal?

The existential question for Instagram is how it combats the rise of TikTok and YouTube Shorts. The answer is its own short form platform Reels, which has been growing in popularity on the platform over the last year. Currently it is reckoned that around 2 billion Instagram users interact with Reels every month. Audience size is not the key metric, however. In February 2023, Meta CEO Mark Zuckerberg said the key challenge is making money out of Reels. To this end, he is keen to encourage creators to make more Reels, which in turn can generate advertising revenues. Currently, Instagram is playing catch up to its main rivals. But if the US did decide to ban or restrict TikTok usage, then there may be an opportunity for Instagram to fill the vacuum. One interesting trend that is currently playing out is a shift towards AI-recommended content. This isn’t welcomed by all users, but Meta is convinced it leads to increased levels of user engagement.

Snapchat: betting on AR

Snapchat is aiming to reach “over one billion people in the next 2-3 years”. Currently the digital first platform has around 750 million monthly active users. In terms of its strategic priorities, the company said that more than 70% of Snapchatters who download Snapchat engage with AR on their first day in the app. As for shortform, time spent per Spotlight viewer now meaningfully exceeds the time spent watching Friend Stories per Story viewer. Evan Spiegel, co-founder and CEO, says: “We have everything we need to build a successful business over the long term – and a long-term vision for what we believe will be the most meaningful advancement in computing the world has ever seen: AR.” On average, 250m people engage with AR every day on Snapchat. The community plays with AR Lenses billions of times per day. This has allowed the platform to develop a lead in AR which it views as a competitive edge.

Twitter: the everything app?

Elon Musk’s first few months in charge of Twitter following his $44bn takeover were characterised by the media as a combination of chaos and dark comedy. And there’s no question that his abrasive style sent some key advertisers heading for the door.  That’s a big problem considering that more than 90% of the platform’s revenue comes from ads. During his short time in charge, he has sought to increase subscription revenues – but this has so far not engendered much enthusiasm among users. Current estimates suggest that around 450,000 peoples are paying between $8-11 for premium Twitter Blue service. That equates to around $4-5m, which is not a lot in terms of the overall costs and revenues associated with the platform.

Nevertheless, it’s still hard to bet against the man who built Tesla and has plans to land a spacecraft on Mars. So why exactly has he invested in the platform? One guess is that he wants to use Twitter to build a ‘super app’ – similar in to Chinese’ success story WeChat. This would place Twitter as part of a digital ecosystem that encompasses shopping, banking, entertainment, delivery and much more.

Spotify: doubling down on video podcasts

Q1, 2023 saw Spotify make an aggressive move in the direction of the podcasting sector. During its Stream On event in early March, the audio pioneer announced a revamped landing page and new tools to serve its podcasting community. It also revealed a series of exclusive podcast deals and provided insights into how podcasters can grow and retain audiences. One new feature promoted by Spotify is Podcast Chapters, which lets creators divide their shows into multiple segments.

Spotify’s podcasting ambitions take on an added significance now that the platform is backing video podcasts such as Julia Fox’s Forbidden Fruit and Markplier’s Distractable. Head of global podcast studios Julie McNamara said: “Video podcasting is one of the fastest growing areas of podcasting, and we expect that growth to continue.” With 70,000 video creators on the platform, it’s clear that it’s time to stop thinking of Spotify as just an audio platform. The company is also redesigning its app to make it better suited for vertical video across its core functionality.

Twitch: changing of the guard

As reported this week, Twitch CEO and co-founder Emmett Shear is leaving his post after 16 years. His replacement Dan Clancy’s first unenviable task was to announce a 400 reduction in workforce at the Amazon-owned streaming platform. Justifying the move, he explained: “Like many companies, our business has been impacted by the current macroeconomic environment, and user and revenue growth has not kept pace with our expectations. In order to run our business sustainably, we’ve made the very difficult decision to shrink the size of our workforce.” Twitch remains a sizeable force in social media, with around 8 million streamers a month and estimated revenues of $2.8bn in 2022. But a key issue for Clancy is restoring trust in the platform after a widely-reported gambling scandal rocked the business last year.

Bluesky, Shiller, Reddit and Pinterest: Best of the rest

This was the quarter when Twitter co-founder Jack Dorsey launched a beta version of Bluesky on Apple’s App store; while Snoop Dogg joined forces tech entrepreneur Sam Jones to unveil Schiller. Launching in April 2023, the Shiller team say that the app “combines the best of web3 technology with live, interactive video and audio streaming, to provide a one-stop-shop for creators, including NFT projects, artists, brands, and opinion leaders, to monetise their following and connect with audiences.”

Reddit attracted some attention when it announced plans to separate text and video into separate feeds called “Read” and “Watch”. Reddit says the Watch feed – which is expected to look a bit like TikTok, will be targeted at “video lovers”.

As for Pinterest, this week saw news of a year-long partnership with IAC-owned digital publisher Dotdash Meredith that will bring nearly 200 original videos to the platform. Pinterest has been investing in original content and doubling down on its partnership endeavours (note also its Conde Nast partnership), expanding its efforts with Pinterest Originals. Pinterest’s focus on building native content publishing tools for creators and publishers “has led to a 30% quarter over quarter (in Q4) video supply increase”.

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