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Snap reported Q1 earnings today. Google reported last week. Meta and Reddit are coming later this week. What are all these major platforms telling us about ad prices in mid-2025?
First, the good news from Snap
Based on its just-released quarterly earnings results, Snap did a lot of good things in Q1:
- Hit 900 million MAU
- Grew DAU 9% to 460 million
- Grew revenue 14% to $1.36 billion
- Grew direct response ad revenue 14%
- Grew Snapchat+ subscribers 59%
- Grew “time spent watching content” by an unreleased amount
- Grew total active advertisers by 60%
On the ads and direct response front, Snap has made serious progress. In a first, 75% of Snap’s revenue is now driven by performance ads, reducing the company’s dependence on brand spend and aligning tighter with the more elastic performance spend (deliver performance and spend will increase, plus probably ad prices).
Measurement is better too.
Snap says SKAdNetwork reported app purchases grew more than 30% year-over-year in Q1. (On a related topic, note that Snapchat Advanced SAN is now active, providing more performance data for MMPs like Singular.) Plus, Snap made improvements to its automated Target Cost (tCPA) bidding strategy, using AI to help advertisers get more consistent ROI.
In addition, Snap started testing auction bidding for Sponsored Snaps and released improvements in how advertisers can control what their ads appear next to.
But there’s some bad news too
As I write this on the afternoon of the 29th, Snap’s stock is down 13% because the company declined to provide earnings guidance for Q2.
Why?
There are uncertainties with “how macro economic conditions may evolve in the months ahead, and how this may impact advertising demand.”
What does this mean?
Snap’s talking tariffs. With massive tariffs, Amazon prices are rising … and so are out-of-stock rates, including at Walmart and Wayfair. With tariffs of 145% in some cases, a drop-ship product that cost $100 a few months ago will cost $245. While previously shipments under $800 were tariff-free under pre-existing de minimis trade exemptions, that loophole is now closed.
That caused Snap’s uncertainty and its resulting stock price drop. And the same thing prompted Google’s Philipp Schindler to say after last week’s excellent quarterly results that there will be “a slight headwind to our Ads business in 2025, primarily from APAC-based retailers.”
Think Shein.
Temu.
AliExpress.
Wish.
All of these have factory-direct or China-sourced inventory. They offer super low prices via long-tail logistics. They’ve invested heavily in user acquisition in the U.S. for years, and also buy millions of ads every month, contributing to inflationary pressure on ad prices.
But maybe not anymore.
Ad prices: we’ll know more at the end of this week
Meta reports earnings tomorrow, on Wednesday. Reddit will report on Thursday, and Pinterest will share its quarterly earnings on May 8.
The questions are complex:
- How much revenue will ad networks and publishers lose because of these macroeconomic changes?
- How much will that withdrawal from the ad markets increase available inventory for others?
- And how much will that depress ad prices for everyone?
Ad auctions are complex and the removal of even several major players won’t necessarily crater the market, because the next highest bidder’s bid is probably not that much lower, but over time, the removal of ad spend can have a significant impact. During Covid, for example, Meta CPMs temporarily declined 35-50%. There was less demand, and ad prices decreased.
Ad prices going down is interesting for many mobile growth marketers.
- They monetize via ads, so it’s bad
- They grow via ads, so it’s good
Which is better probably depends on your monetization mix: if you’ve been able to successfully incorporate subscription revenue and/or IAPs into your app or game, and you’re less dependent on ad monetization, it’s a great thing. Marketing gets cheaper; revenue stays reasonably high.
But if you’re hypercasual or casual, or maybe a utility, and ad monetization is your only source of revenue … this is a problem.
Is there a bigger story coming …
We’ll know more by the end of this week how Google and Reddit feel about the future.
The bigger concern, likely, is if this is just 1 or a few verticals impacted, or if this is an early indicator of a general recessionary trend. Lower e-commerce sales don’t just mean lower ad spend for retail items. Follow-on impacts including things like UPS laying off 20,000 workers this year and closing 73 facilities because there’s less need to deliver stuff to Americans. And in a massively interdependent system, those follow-on impacts have their own consequences as well.
Ultimately, as we saw during COVID, the strongest and best survive, and position themselves well for coming rebound periods of growth.
