Why Facebook’s Ad Business Will Take a Hit — and What Advertisers Should Do

Why Facebook’s Ad Business Will Take a Hit — and What Advertisers Should Do

Apple Facebook Uncategorized

On September 22, Facebook made an unusual announcement well ahead of its third-quarter earnings, which won’t be shared until late October. In a blog post, Facebook indicated that its third-quarter results will take a hit because of the impact of Apple’s increased privacy controls. Let’s take a look at the news and what it means.

What Facebook Announced

  • Facebook confirmed that for the third quarter, the company’s advertising business will take a financial hit because of the impact of Apple’s Application Tracking Transparency (ATT), which went into effect in 2021 with a recent iOS update on users’ personal devices.
  • Under ATT, users are asked to give apps permission to track their behavior on their Apple devices. Facebook needs Apple users to give apps permission to track their behavior; Facebook has built a thriving advertising business based on its ability serve up targeted ads to iOS users based on their behavior off Facebook. But as many as 96 percent of users in the United States are opting out of having their behavior tracked.
  • In a blog post, Graham Mudd, vice president of Product Marketing, Facebook, wrote, “As we noted during our earnings call in July, we expected increased headwinds from platform changes, notably the recent iOS updates, to have a greater impact in the third quarter compared to the second quarter. We know many of you are experiencing this greater impact as we are.”
  • Mudd also said that Facebook underreported iOS web conversions by approximately 15 percent. “We believe that real world conversions, like sales and app installs, are higher than what is being reported for many advertisers,” he wrote.

What Facebook’s Announcement Means

  • Facebook’s war with Apple will intensify. Apple could find ways to impose even more privacy controls.
  • More advertisers will bolt to the Android operating system and take their ad business to Google.
  • Facebook will be forced to become more transparent to ad partners about its ad performance, especially after admitting that the company underreported iOS web conversions.
  • Facebook will probably devise more ways to mine first-party data from its own platform and Instagram to sell ad space.

What Advertisers Should Do

  • Consider tapping into your own first-party data more effectively to create ads (and True Interactive can help you do so). For example, collect more first-party data by using cookies to understand who visits your site; or run a promotion that collects email addresses. Collect purchase data if applicable to your site.
  • Consider relying on advertising platforms such as Amazon and apps such as Snapchat and TikTok that have strengthened their own ad products through their own proprietary first-party data.
  • Watch for the emergence of new tools and approaches. Apple’s ATT will inspire the emergence of workaround tools as well as approaches for developing personalized content. This is happening already as Google adopts privacy controls.
  • Review Facebook’s advice for how to analyze your performance and adapt your ad strategies on Facebook (or ask your agency partner to do so for you). Mudd provided some detailed steps to take in his post.
  • Consider negotiating more favorable rates for your ad account with Facebook if your performance is dropping but you still want to work with Facebook.
  • Don’t panic and change your ad strategy completely. This situation is still evolving.

At True Interactive, we’re doing the heavy lifting to help our clients navigate these changes. Bottom line: be ready to adapt.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Facebook Reels: What Brands Need to Know

Facebook Reels: What Brands Need to Know

Facebook

One year after Instagram announced the debut of short-form video feature Instagram Reels, parent company Facebook is joining the party. Reels first debuted on Instagram in 2020 in a clear bid to compete with TikTok. Facebook, having recently announced its plans to test Facebook Reels in the United States, is now figuring out ways to make Reels a more popular feature on Facebook itself (the U.S. initiative is an expansion of testing already launched in Mexico, Canada, and India). As part of the test, Instagram users can cross-post their reels to Facebook.

What do these developments mean for your brand? Read on to learn more.

What Is the Reels Feature?

When Reels rolled out on Instagram in 2020, the video time cap was 15 seconds, but the feature has since grown, and grown again: videos can now be up to one minute long. Using Facebook Reels, people can watch others’ videos, as well as create/share their own reels from the Facebook app. The feature’s reason for being? To allow people to “express themselves, discover entertaining content, and to help creators broaden their reach.” According to Facebook, almost half of time spent on the app is devoted to watching videos. Pair this data with the statement that Reels is growing “especially quickly,” and the test run of Facebook Reels makes a tremendous amount of sense. As CEO Mark Zuckerberg told investors, “We’re very focused on making it easy for anyone to create video, and then for those videos to be viewed across all of our different services, starting with Facebook and Instagram first.”

As Zuckerberg implies, emphasis is on creativity and its possibilities. Facebook Reels users have access to creation tools much like those already available on Instagram: video capture, for example, as well as camera roll import, timed text, and music selection. Editing tools allow people to speed up or slow down their video, and to incorporate augmented reality effects from Facebook or third-party developers. And after creating a reel, users can decide how to share it: with select friends, or the default share, which is the general public. As is the case throughout Facebook, Reels will be recommended to people based on their interests, who they engage with, and what’s trending as popular.

Why This News Matters

Facebook’s efforts speak to deeper trends and resonances. For one thing, the news demonstrates the tremendous sway TikTok holds in the social world. TikTok enjoys approximately one billion monthly active users. Sixty percent of TikTok users hail from Gen Z, soon to become the largest generation. Furthermore, TikTok users of all ages have proven themselves to be ardent fans, spending an average of 52 minutes per day in the platform and opening the app roughly 8 times per day. Eighty-three percent of TikTok users have posted a video. Facebook understands and respects these stats, and is responding accordingly.

The news also underlines the growing importance of video. As noted above, video accounts for  a major chunk of time spent on Facebook. And on Facebook’s latest earnings call, Zuckerberg pointed to Reels as “the largest contributor to engagement growth on Instagram.” In short, videos are hot.

Reels represent a possible advertising opportunity. While Facebook told TechCrunch that Reels on Facebook don’t currently include ads, the plan is “to roll out ads in the future.” Instagram, which has already begun to monetize Reels through ads, is showing what that might look like for Facebook down the road.

Finally, Facebook’s actions underscore the growing influence of individual creators. Consider the fact that in July, the social networking behemoth announced a plan to invest more than $1 billion in creators across both Facebook and Instagram through 2022. The platform’s willingness to shell out that kind of cash speaks to a fundamental belief in influencers’ power.

What Brands Should Do

What do these developments mean for brands? We recommend that you:

  • Embrace video, especially short-form video. Facebook is certainly demonstrating its commitment to the form. And as we blogged earlier this year, apps such as YouTube are launching short-form video options such as YouTube Shorts.
  • Look for advertising opportunities. Reels may not include ads on Facebook yet, but as noted above, the landscape is constantly evolving. What opportunities for advertising on video features exist today?
  • Understand that influencers hold a lot of sway. Consider how you might partner with individual creators to do influencer outreach for your brand.

Contact True Interactive

Pondering the role video might play in your brand’s strategic plan? Contact us. We can advise.

Why Advertisers Should Never Bet Against Facebook

Why Advertisers Should Never Bet Against Facebook

Facebook

Facebook has done it again. On April 28, the company announced quarterly earnings that crushed Wall Street’s expectations, demonstrating a remarkable resilience. Facebook continues to ascend as a premier advertising platform, too, second only to Google in terms of online ad marketshare. Let’s take a closer look.

What Facebook Announced

Facebook’s quarterly results were impressive by any measure:

  • Earnings: $3.30 per share vs. $2.37 per share forecast.
  • Revenue: $26.17 billion vs. $23.67 billion expected.
  • Daily active users (DAUs): 1.88 billion vs. 1.89 billion forecast by FactSet.
  • Monthly active users (MAUs): 2.85 billion vs. 2.86 billion forecast by FactSet.
  • Average revenue per user (ARPU): $9.27 vs. $8.40 forecast by FactSet.

The increase in active users is key. Demonstrating that it can continue to grow its user base helps Facebook attract more advertisers.

Why Facebook Is Succeeding

Why is Facebook continuing to grow quarter after quarter even amid controversies and threats from legislators and competitors? Here are some reasons:

  • Advertisers remain loyal to Facebook. Facebook said its impressive revenue growth came from a 12 percent increase in the number of ads delivered – and a 30 percent year-over-year increase in average price per ad. Even as businesses were being rocked by the pandemic and faced an uncertain year, they were willing to pay more for ads on Facebook. And why not? Social media platforms such as Facebook enjoyed tremendous growth in 2020 as the pandemic drove more people online. Advertisers wisely went where their audience was.
  • Facebook is monetizing its user base beyond ad targeting. This is important. By its own admission, Facebook’s ability to deliver targeted ads is being threatened by Apple’s app tracking transparency privacy initiative in which users of iPhones will now need to agree to allow a business to collect information about them – known as an opt-in policy. The world’s largest social network is upset because its advertisers will have a harder time tracking its users off Facebook and serve up personalized ads to them. But Facebook has been steadily finding different ways to monetize its app (and Instagram’s) beyond ad targeting. For instance, in its earnings announcement, Facebook CEO Mark Zuckerberg discussed how the company continues to build social commerce features. And Facebook’s Marketplace service, where users can buy and sell goods, continues to grow. These features keep businesses and people engaged on Facebook, generate more ad revenue for Facebook, and give Facebook a stockpile of first-party search and purchase data to deliver more personalized experiences.

Going forward, Facebook will continue to monetize that user base in creative ways – an example being the launch of several audio features that will generate revenue for creators and inevitably create a more engaged user base – which generates more advertising revenue.

 What Advertisers Should Do about Facebook

  • Continue to capitalize on tools to help you connect with your audience on Facebook. For instance, as Mark Zuckerberg mentioned to investors on April 28, Facebook launched Shops in 2020 to help businesses more easily conduct online commerce, and there are now more than 1 million monthly active Shops and over 250 million monthly Shops visitors.
  • As always, balance your advertising among the major platforms that continue to deliver value, including Amazon Advertising, Facebook, Instagram, Google, and Microsoft Advertising.
  • Monitor expected privacy legislation and the impact of Apple’s ATT initiative, but don’t overreact. Facebook continues to show a remarkable aptitude for managing threats from competitors and legislators.

Whatever you do, don’t count out Facebook regardless of what you read and hear about the headwinds the company faces. Facebook is not going away. It’s the world’s largest social media network for a reason. Follow your audience and engage with them.

Contact True Interactive

At True Interactive, we help businesses capitalize on social media advertising to build their brands. We can help you, too. Contact us to learn more.

 

Why Amazon and Facebook Are Catching up to Google

Why Amazon and Facebook Are Catching up to Google

Advertising Amazon Facebook Google

The race to lead the online advertising market is getting tighter. According to a new report from eMarketer, Amazon Advertising and Facebook are catching up to Google’s share of the online advertising market. Let’s take a closer look.

What eMarketer Reported

eMarketer says that in 2020:

  • Amazon’s share of the online advertising market increased from 7.8 percent in 2019 to 10 percent in 2020.
  • Facebook’s share increased from 23.6 percent to 25.2 percent.
  • Google’s leading share dropped from 31.6 percent to 28.9 percent.

To put this data in perspective, eMarketer says Google’s share of online advertising was 38.6 percent in 2017.

What Does the Marketer Data Mean?

  • Amazon Advertising is only going to get bigger. That’s because Amazon delivers advertisers insight on its vast customer base – and not just casual searchers, but people searching with intent and making purchases. Per eMarketer, Amazon is enjoying growth across the board — search revenues from Sponsored Products and Sponsored Brands, and video ad revenues on properties including Amazon Fire TV, Twitch, and IMDb TV. It’s worth noting that Amazon’s growth is coming not just from ads on Amazon.com but from the Amazon network, as noted (e.g., Twitch and IMDb). That means Amazon is figuring how to use data about its customer base to expand its ad services across the web. In addition, as we noted on our blog recently, Google’s crackdown on third-party cookies is favorable to companies such as Amazon that know how to sell ads based on their massive inventories of first-party cookie data.
  • Facebook and Google are doing just fine. Despite Google’s drop in market share, the company generated a whopping $147 billion in ad revenue in 2020. Google saw a dip in its ad revenue in 2020 because its travel advertisers were hit hard by COVID-19, but the company came roaring back in the back half of the year. Google’s ad revenue actually increased by 9 percent year over year. The decrease in Google’s market share may actually help the company combat multiple anti-trust lawsuits at the state and federal level. Meanwhile, Facebook continues to reap the benefits of being the world’s largest and dominant social media network. Despite numerous controversies, Facebook enjoyed advertising growth in 2020. An increase in its user base has played an important role. That growth spiked owing to the massive uptake of social media that occurred during COVID-19, but Facebook’s user base has been climbing for years. Simply put: there is a disconnect between news media criticisms of Facebook and the behavior of its user base.

What Advertisers Should Do

  • First, follow your audience. Make your advertising investments based on the journey your own customers are making. Most customers rely on multiple digital touchpoints on their way from awareness to purchase. It’s likely that no single ad platform will (or should) dominate your spend. Incorporating Amazon, Facebook, and Google into your ad spend is probably not going to be an either/or choice (more about that on our blog).
  • Do your homework. The ad giants are going to launch more ad tools as the market place becomes more competitive. Amazon recently launched Amazon Live, which makes it possible for retailers to use livestreams to sell products – part of the live commerce trend we blogged about recently. In addition, up-and-comers such as Walmart Connect and Macy’s will launch more ad products as they capitalize on their own first-party data to generate more ad revenue.

Contact True Interactive

At True Interactive, we’ve been helping businesses succeed through online advertising for many years. Our services span Google, Facebook, Amazon Advertising, and much more. Contact us to learn how we can help you.

 

The Facebook Spat with Apple: Advertiser Q&A

The Facebook Spat with Apple: Advertiser Q&A

Facebook

If you operate a business on Facebook, you’ve probably received pop-up notices from Facebook warning you about ominous changes coming because of Apple’s latest operating system update. What’s exactly happening, and why? Our new advertiser Q&A takes a closer look.

Why Is Facebook Upset with Apple?

The conflict comes down to access to customer data.

Apple’s new operating system update, iOS14.3, contains new privacy tools that prevent apps from being able to track user activity across the internet. All applications need to ask iPhone users for permission to track their activity for the purposes of advertising. There an estimated one billion people around the world who own an iPhone.

Put another way: under iOS14.3, if a person has a business’s app on their iPhone, that person needs to agree to allow the business to collect information about them. iPhone users now have more control whether they actually want personalized ads generated as the result of an app following them around the internet.

Facebook believes that this opt-in approach could create a major problem for Facebook’s app. Most Americans have expressed discomfort with the way Facebook tracks their personal data. Since almost all of Facebook’s revenue comes from advertising, Facebook sees the new opt-in policy as a threat.

How Has Facebook Responded to iOS14.3?

Facebook has attacked the update publicly. For example, in December, Facebook argued on its own site that tougher privacy controls will hurt small businesses that rely on Facebook advertising to reach people. Dan Levy, Facebook’s vice president of Ads and Business Products, wrote that Apple is “hurting small businesses and publishers who are already struggling in a pandemic.” He elaborated:

These changes will directly affect [small businesses’] ability to use their advertising budgets efficiently and effectively. Our studies show, without personalized ads powered by their own data, small businesses could see a cut of over 60% of website sales from ads. We don’t anticipate the proposed iOS 14 changes to cause a full loss of personalization but rather a move in that direction over the longer term.

Facebook has also reached out to businesses, news media, and agencies (including us) to voice its position through content such as webinars.

What Is Apple’s Response to Facebook?

Apple continues to go about its business without a corporate response with one exception: the following tweet from CEO Tim Cook, which speaks for itself:

Tim Cook tweet

Otherwise, Apple has spoken with its actions by going forward with the iOS 14.3 update.

When Does the iOS14.3 Update Happen?

Although Apple made iOS 14.3 effective in December 2020, the company has not yet enforced the opt-in prompt. None of the changes discussed here is happening as of this writing. Apple has not announced when it will make these changes and enforce the prompt.

What Should Advertisers Do?

First off, we recommend monitoring the development closely. But don’t panic. No one knows how many iOS 14.3 users will opt out with their apps – Facebook or otherwise. To be sure, people opting out will compromise everything from conversion data to attribution to custom audience sizes. Facebook says it plans to roll out new features in events manager to help mitigate the impact of those changes. We are monitoring this situation for our clients. Stay tuned.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Why Facebook Acquired Kustomer

Why Facebook Acquired Kustomer

Facebook

Facebook continues to turn itself into an advertising and commerce destination. On November 30, Facebook announced the acquisition of Kustomer, a customer relationship management platform that specializes in conversational commerce, or forms of commerce derived from chat, messaging, and other interactive channels. The acquisition is clearly intended to beef up Facebook’s messaging and chat features as revenue generators.

We’ve been blogging about Facebook’s growing role as an advertising powerhouse for quite some time. Facebook is now the second-largest online advertising platform behind Google, according to eMarketer. Despite some occasionally bad publicity (and ad boycotts) Facebook’s ad revenue just keeps climbing in 2020, as I discussed on our blog in August.

Meanwhile, Facebook has been steadily building out messaging services as ways for brands to build and manage customer relationships. Businesses regularly use Facebook Messenger to engage with customers (as Spotify does) and manage transactions (as Paypal does). Developing Messenger as a form of conversational commerce is important to Mark Zuckerberg and COO Sheryl Sandberg. As Sandberg told investors in 2019,

Messaging is one of the fastest growing areas for online communication–especially between businesses and people. We’ve seen businesses use Messenger to reach customers, generate new leads and even sell cars. For example, French auto manufacturer Renault used a combination of Instagram Stories and Click-to Messenger ads to drive sales of a limited-edition vehicle, the Captur Tokyo. Facebook was their only advertising channel, and over the span of 30 days, they sold 100 cars—20 directly through Messenger. This quarter we added a Click-to-Messenger feature in Stories so businesses can grab someone’s attention in Stories and then continue the conversation.

In fact, Kustomer already helps businesses manage apps such as Messenger and WhatsApp effectively. It’s the software that makes it possible for business to aggregate and respond to customer inquiries via Facebook Messenger. Kustomer must be doing its job well. By purchasing the company, Facebook will provide capital and resources to scale Kustomer’s platform across Facebook’s global business. As Bloomberg tech reporter Kurt Wagner wrote on LinkedIn:

Facebook has a vision to turn its messaging services into de facto websites for businesses. In Facebook’s perfect world, a business could post its product catalogue, process payments, and handle customer service requests — all within WhatsApp. Buying Kustomer should help Facebook with that third part.

Indeed, in announcing the acquisition, Facebook said more than 175 million people contact businesses via WhatsApp. By acquiring Kustomer, Facebook will certainly become even more appealing to advertisers. Why? Because Facebook will be able to own both awareness building (via advertising) and customer conversion (via conversational commerce). As CNBC noted,

By bringing Kustomer into the fold, Facebook will be providing small businesses that use its service to advertise and sell goods more features to close sales through the social network’s services. This should seemingly lead these businesses to spend more on Facebook advertisements. That’s key for the company, which makes nearly 99% of its revenue from advertising.

What Businesses Should Do

  • Take a closer look at Facebook’s conversational commerce features such as Messenger and WhatsApp. Messenger Ads can spark interest, for example, and the Messenger the app can be a brilliant customer service tool. And combine Messenger with Stories for an engaging and ultimately personal customer experience.
  • Watch how competitors such as Amazon Advertising and Google respond. Google especially has a huge opportunity to help businesses build out their Google My Business listings with conversational commerce tools such as chat.

Contact True Interactive

How can your brand benefit from digital advertising? Contact us. We can help.

How Adjusting Your Facebook Ad Objectives Can Deliver More Conversions

How Adjusting Your Facebook Ad Objectives Can Deliver More Conversions

Facebook

Facebook’s user base keeps growing as a reflection of an increased adoption of digital among the general population in 2020. Businesses want to use advertising to squeeze as much revenue as they can from this massive audience, as well they should. At True Interactive, we’ve been helping advertisers succeed on Facebook for years, and one way we do that is by trying different approaches with Facebook’s advertising tools. Recently, we’ve been demonstrating to our clients how a fresh approach to choosing Facebook ad objectives can make Facebook ads more effective.

The Conventional Wisdom about Facebook Ad Objectives

When businesses set ad goals, they typically have two strategies in mind: build brand awareness with prospects (i.e., people who have never been to their site before) and also retarget website visitors and existing customers to drive conversions. From there, businesses select ad objectives for a given campaign. Now, conventional wisdom says that when a business wants to attract new customers (as opposed to retargeting existing ones), it’s best to choose brand awareness or consideration ad objectives such as reach, traffic, engagement, and app installs (among others). But for a retargeting campaign, it’s better to choose conversion-based objectives such as conversions, catalog sales, and store traffic.

Makes sense, right? Why set the bar too high for brand awareness by actually trying to measure conversions? It’s far better to save conversion-based objectives for retargeting existing customers, who already know about your product and are more likely to buy it.

Setting Conversion-Based Goals for Prospects

And yet, we’re delivering results by setting conversion-based goals for prospects, too. It sounds like a simple thing to do: set a conversion goal for a prospect. And you can literally do it with a click. By experimenting with some of our campaigns, we’re learning that a powerful ad targeting prospects can indeed drive them to conversion.

Now, I’m not talking about running the same ad for a prospect that you would for a current customer. You still need to customize different ads for different audiences. Ads for prospects require different calls to action than ads for existing customers, and indeed you may need to do completely different ads for each, such as special offers that apply only to new customers.

To be sure, conversion costs for retargeting-oriented campaigns are lower. But so far the conversion rate for prospects justifies the effort of running brand-awareness ads on Facebook – because these ads can do more than raise awareness.

What Happens If You Lack Conversion Data?

What happens if your business lacks enough conversion data to set up a conversion goal? In that case, we suggest that you use the conversion step before your final conversion so that the Facebook algorithm will have more data to optimize towards (example: if you don’t see a lot of sales, then don’t set your conversion goal to sales — set it to “add to carts”).

So, why might conversion-oriented ad objectives work for prospects? I believe that social media in general is becoming less of a lean-back-and-scroll experience. More users are spending time on social with intent to learn more about products and buy them. That’s because more Gen Zers and Millennials are growing up with a social experience that includes the presence of ads, more so than their predecessors did. They’re more comfortable viewing social as an intent-based platform. So they’re more likely to convert on an ad that introduces them to a new product.

Have you been experimenting with ad objectives? What have your results been?

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Photo by NeONBRAND on Unsplash