Social media companies Facebook, Twitter and Pinterest posted blowout revenue gains in third-quarter earnings released Thursday, a sign that disruptions related to the coronavirus pandemic have cooled and that marketers again are spending at higher levels. The strength of these companies' performance — mirrored in other Big Tech platforms like Google and Amazon, which reported earnings concurrently — signals that digital advertising has broadly fortified its position of dominance in the media market while traditional channels like linear TV flounder amid the health crisis.

Even in a category known for notching hefty growth figures, Thursday's batch of earnings stands out. Facebook saw ad revenue jump 22% year-on-year to $21.47 billion for the period ended in September, a windfall for a company that just months ago was mired in a widespread advertiser boycott. Pinterest, which has seen activity rise with the pandemic, reported revenue grew 58% YoY to $443 million, along with record user growth. Twitter, recently bogged down by problems related to its ad-targeting tech, shared disappointing user statistics, but emphasized returning advertiser demand: Ad revenue was up 15% YoY to $808 million and total engagements with ads spiked 27%.

Taken together, the blockbuster results contribute to a momentum previewed by Snap last week, with the Snapchat owner experiencing a revenue surge of 52% YoY to $678.7 million for the period. An open question is whether the platforms can keep the ball rolling as COVID-19 continues to spread throughout the U.S. and as new regulatory challenges, including those around data privacy, loom on the horizon.

New bets pay off

Social media usage has generally climbed among locked-down consumers who are looking to stay connected, but that hasn't always translated to a revenue bump as many advertisers tightened their budgets at the pandemic's onset. As brands and users adjusted to the health crisis through Q3, media taps turned back on, and platforms quickly built out features to accommodate business needs around navigating COVID-19.

Facebook, for example, has introduced a wide array of e-commerce integrations across its core social network, Instagram and WhatsApp in a bid to help small businesses make the shift online. Facebook Shop, an online storefront that rolled out in the second quarter, has seen pleasing progress, Facebook Chief Operating Officer Sheryl Sandberg told investors on a call discussing the Q3 results. The offering expanded to WhatsApp last week.

"Big companies can afford to buy broad-based ad campaigns that hit countries or whole geographies. Small companies can't. So survival, and the economic growth and the increasing ability to stay afloat and hire has really been driven across the board by SMBs," Sandberg said on the call.

"Now some verticals have experienced more of this. Certainly, e-commerce is the leading example, but there are a lot of other businesses that also lend themselves to online," she added.

Other platforms, like Twitter, benefited as cultural conversations turned back up again in Q3 with the return of live sports and other destination viewing events that were curtailed in the early days of COVID-19. Stronger engagement with ads helped Twitter offset flagging user growth, as monthly daily active users (mDAUs) only increased by 1 million over the period, putting the platform's total audience at 187 million mDAUs.

"Advertisers were waiting to spend on Twitter and they all came back to the platform with the return of live events," eMarketer analyst Nazmul Islam said in emailed comments. "We expect Twitter to continue to be attractive for brand advertisers and they're on the path to add more direct [response] advertisers as well."

Meanwhile, Pinterest rounded out its product suite to center more on areas like shopping and spotlighting smaller creators and businesses. The company, which resists the social media label to instead position itself as a destination for inspiration and ideas, has also made a concentrated push to promote well-being and tamp down on toxic content. A more proactive stance on brand safety potentially bolstered Pinterest's appeal at a time when rivals like Facebook faced intense flak for their failure to take down hate speech, which led to a wide-ranging advertiser boycott of social media over the summer.

"[Pinterest] is the social platform of positivity, and its record growth in user engagement was sustained throughout Q3 and will only continue to build in Q4," Carly Carson, social director at agency PMG, said over email. "The platform capabilities mentioned in the earnings call, including its newest shoppable ad partnerships, are coupled with more advanced bidding capabilities, which in turn, have driven incredible media efficiencies for brands."

Headwinds ahead

If Q3 represented a peak for the social media category, the next few months could represent a comedown. Though a holiday season impacted by COVID-19 will likely benefit companies that have integrated more e-commerce functionality, and result in a sturdy fourth quarter, more serious existential threats are speeding down the pike in 2021.

Data privacy regulations, including the California Consumer Privacy Act, continue to affect the digital advertising ecosystem, while antitrust scrutiny of Big Tech is ramping up both at home and abroad. Facebook potentially faces an antitrust lawsuit akin to the one that hit Google earlier this month, with The Wall Street Journal reporting the Federal Trade Commission could file a complaint by year's end.

Planned changes to Apple's privacy policies will also have a considerable impact on both mobile platforms and marketers. The iPhone maker will soon require apps to ask for opt-in consent from users to access its Identifier for Advertisers (IDFA), a randomly generated code assigned to the company's devices. It's a development that has sparked controversy, leading Apple to push back the original implementation date to early next year. A delay softens the blow for Q4, but casts a shadow over the start of 2021.

"[IDFA's] going to have a disproportionate impact on app installs and thus, our audience network," Facebook Chief Financial Officer David Wehner said on the call with analysts. "And so that's obviously a big challenge for app developers who are looking to grow their business in what is a difficult time.

"We're looking at various options, but our best view is that there's — there are going to be significant headwinds next year as a result of these changes, specifically on iOS14," Wehner said.