Social media engagement points way to monetization for these players - Morgan Stanley
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A dive into how social media engagement trends are shifting after the "shelter-in" of the COVID-19 pandemic shows some key directional information for the sector's leading players, Morgan Stanley says in a new analysis.
"We continue to believe the equation 'engagement + investment + innovation = monetization' is an important framework for online platforms," Brian Nowak and team say, emphasizing the importance of engagement as a lever for opportunities to monetize.
A look at data from Sensor Tower shows some insights to keep an eye on with regard to key players in the sector: Meta Platforms (FB
+1.3%), Snapchat (SNAP
-4.4%), Pinterest (PINS
-8.3%), Twitter (TWTR
-3.7%) and TikTok (BDNCE).
Overall, even off the surge that social media got from the COVID-19 pandemic in 2020, total time spent by daily active users on the six leading networks grew by 7% in 2021 - to about 7 trillion minutes (or a staggering 5 billion days' worth).
Who took time share in that gain? Mainly TikTok (BDNCE), which saw time spent grow 24% from 2020, followed by Facebook/Instagram (FB
+1.3%), which managed growth of 7% and 9% respectively even off the strong prior year. And five of the six platforms - everybody but Pinterest (PINS
-8.3%) - saw daily active users grow, driving the time-spent gains. "Only TikTok and Instagram saw daily engagement grow in '21 through reopening," Morgan Stanley notes.
Turning to company-by-company looks, the firm notes Meta's engagement opportunity (and thus its monetization opportunity) "seems to have structurally expanded" through shelter-in, with Facebook/Instagram minutes now about 23% above 2019 levels. And DAUs are still growing off of large levels.
Morgan Stanley calls Meta one of its best ideas for 2022. "This leading, growing, and broad-based engagement growth (combined with leading investment and innovation, most recently around IDFA solutions)" reinforces the firm's confidence in Meta's ability to drive outsized ad revenue growth this year.
TikTok owner ByteDance isn't publicly traded, but some "big monetization" ahead can affect rivals. TikTok's U.S. daily users grew 13% last year, to about 48 million, and average time spent per user rose 10% to about 87 minutes a day, highest in the group.
While TikTok isn't a near-term material threat, "the extent to which TikTok is able to build scalable performance-driven ad tools will put extra pressure on other platforms (namely SNAP/PINS/TWTR) to improve their ad products and deliver quantifiable results to win budgets," Morgan Stanley says.
It's staying constructive on Snapchat (SNAP
-4.4%) despite total time spent declining about 14%. Daily active users grew 4% to reach about 61 million in 2021, but average time spent per user per day fell by about 4 minutes, to 22 minutes. On the other hand, current engagement is undermonetized and there are more use cases that can be monetized, and its guidance for 50%-plus multi-year revenue growth didn't even factor in growth in users or time spent per user, the firm says.
The other side of the spectrum is Pinterest (PINS
-8.3%), seeing daily active users and time spent both in decline. U.S. DAUs fell about 19% to 18 million in 2021, while time spent per user per day also fell about 13%, to 11 minutes. And Q4 Street expectations for users still seem too high, the firm says.
"With this backdrop, we think it is important for PINS to clearly explain which products and offerings give them confidence that U.S. users can/will stabilize ... and when products will be developed enough to stabilize the base (we model U.S. users to be flat in â22)." Still, the good news is that at a multiple of 4x Morgan Stanley's 2023 revenue, "there is a lot of negativity priced."
Pinterest (PINS
-8.3%) has reportedly lost its revenue chief, the latest in a large number of executives departing in recent weeks.