??(#18) Social Media: analysis & financials of main players
Costin Ciora, PhD.
CEE Advisor to Simon-Kucher | Financial Analysis Assistant Professor at ASE | Financial Analysis, Strategy, Pricing Expert | Author
Hello,
This is edition #18 of my newsletter "The Story Behind The Numbers". Check also the previous sector analyzed here: https://www.dhirubhai.net/newsletters/7160324639691309056/
In this analysis, my focus was on social media. We are using various apps, and new ones appear: more niched, with different focus. I wanted to learn more about the money in this sector, but also the performance of these companies.
Disclaimer: This newsletter is written on my role of Assistant Professor in the Department of Financial Analysis and Valuation from The Bucharest University of Economic Studies and Managing Director of CIORA Financial Analysis - providing financial analysis services & workshop delivery for startups & SMEs. This analysis reflects only my views based on the available date. The purpose of this newsletter is to connect the story with the numbers, or sometimes the numbers with the actual story. It is, of course, my own view on the topics without any investment recommendation. I hope we can start conversations around the points below.
Let's start with the beginning, and foundation. The number of internet user increase in 2023 to 5,4 bln users. This rapid advancement, correlated with rise of mobile devices and apps, increase the importance of social platforms.
The average daily time spent on social media increase since the rise of smartphone after 2012 from 90 minutes per dat to 143 minutes per day.
Social media, mainly the ad spend on social media is expected to be higher for social media to a value of 247,3 bln $. The value of ad spending on social became the dominant one in 2022.
When it comes to the indicators which are relevant in social media, the average cost per thousand impressions is good to be discussed. This value is the highest for Meta (Family of Apps). Meta had more than twice the value of Tiktok or Youtube.
This value was stable in the previous years compared with the other platforms (including Youtube).
The Social Media Universe includes many apps, as seen below.
Meta's family of apps includes Facebook, Instagram, Whatsapp and Facebook Messenger. Main app, Facebook had 3,06 bln users.
In the same time, the change in the use of platforms is seen below. Generation Z has a different perspective on the apps compared with the general values.
Global players
Analysis of Meta
The monthly active users is close to 4 bln users.
The annual revenue of Meta has skyrocketed since 2009, but also in the previous years. Before the COVID-19 pandemic, Meta had 70,7 bln $ in 2019, while in 2023 it reached 134,9 bln $. Revenues increased with 15,68% compared with previous year.
The revenue only for the family of apps (because Meta has other lines of business as well) increased from 115,7 bln $ in 2021 to 133 bln $ in 2023.
In the same time the profit indicators increase between 2021 to 2023. Gross Profit increased with 14,27% while Operating Profit and Net Profit remained the same in 2023 compared with 2021.
One of the things, that captured my attention was the increase in the weight of research and development for meta. In 2023, R&D was 44% of total expenses.
The Profitability indicators shown below, present a relevant correlation with the increase in the revenues.
Linkedin:
Revenue from LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions were 15,1 bln $ in 2023.
Microsoft states in its annual report for 2023 that "Operating expenses increased $5.3 billion or 10% driven by employee severance expenses, 2 points of growth from the Nuance and Xandr acquisitions, investments in cloud engineering, and LinkedIn." Also "Operating expenses increased $1.3?billion or 7% driven by investment in LinkedIn and employee severance expenses." Moreover, "Gross margin increased $5.8?billion or 12% driven by growth in Office 365 Commercial and LinkedIn, as well as the change in accounting estimate."
Research and development expenses increased $2.7?billion or 11% driven by investments in cloud engineering and LinkedIn.
Linkedin Revenues in total Microsoft revenues is around 7,1% of the total of 211,9 bln $ in 2023.
TikTok
Tiktok is not listed at the stock exchange so, I found limited information about financials. Some related to the numbers of user, where the app is close to 1 bln users worldwide.
Moreover, in 2024, Tiktok Ad revenue is estimated to be 23,6 bln $, with an estimate to 54 bln $ in 2027.
The rise in popularity for the app, based on the graph below by Statista.
Tiktok appeared in various analysis and committee related to concerns related to the security of the platform and influence. It is also under review related to various forms of bans in different countries.
Youtube:
Youtube is part of Alphabet (previously named Google). Alphabet includes Google, and Youtube is a division of it. The revenues of the app related to ad increased from 28,84 bln $ in 2021 to 31,5 bln $ in 2023. In the same time, Youtube services beside the ad ones, include membership fees (increasing from 28,03 bln $ to 34,68 bln $).
Things to watch:
Thanks for reading and take care,
Costin Ciora, PhD.
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References & interesting resources:
This is an amazing analysis. Social media is compelling, shaping how we communicate, connect, and consume information. Understanding its impact is key to navigating the digital landscape effectively and responsibly.