With Facebook turning 15 yesterday, Forrester analyst Brigitte Majewski argues that as regulators pay more attention to the company, it’s ability to innovate could suffer.
Compare how much marketing on Facebook has changed in 15 years to how much TV advertising changed in 80 years. A TV ad remains a TV ad by any other name. But in the lifespan of a high school sophomore, brands have flip-flopped from seeking Facebook followers to praying for a viral video to orchestrating sophisticated social advertising.
Facebook’s Q4 2018 earnings call revealed that marketers drove precious holiday direct response advertising through Facebook to the tune of $16.6bn (£12.7bn) in Q4 2018, compared to $12.8bn in Q4 of 2017. Today’s Facebook is all grown up by advertising standards.
Reach and targeting
Facebook delivers 186m daily active users (DAU) in the US and Canada. Where else can marketers get this kind of reach, plus superlative targeting? And yet, the relationship between marketers and Facebook is strained. The network is infamous for pushing platform changes on little notice that send brands scurrying to rejigger social marketing strategies. Facebook limits access to advertising performance data, asking ad clients to trust its own reporting.
These challenges are small compared to brand safety issues posed by fake news and toxic content, ad fraud issues stemming from fake accounts and bots, and the threat of guilty-by-association posed by Facebook’s lax data privacy policies. But when the chief growth office of Publicis tells the New York Times that Facebook has “no morals”, surely Facebook is at risk of being massively unfriended by its 7m advertisers.
And yet, Q4 ARPU is up YOY in every geography. Marketers just can’t quit Facebook. What will it take? We’re stilling waiting for a dramatic change in user base but as we’ve reported before, user behavior changes slowly. Demographic changes will eventually catch up with Facebook, though it has time to buy up competitors who appeal to younger demographics not interested in Facebook.
Cracking new user behaviors is a challenge. Right now North America carries Facebook’s advertising revenue. Volume wise, most new DAUs between Q3 and Q4 came from Asia Pacific which makes sense given the region’s size. But APAC digital behaviors vary dramatically from N. America and Facebook is struggling to figure out how to monetize where its user growth is.
Marketers choose Facebook because little else delivers the audience for the price. Few competitors can deliver Facebook’s reach, but competition could appear with ads that are better branding vehicles. Brands need a balance of DR and brand-building activity over the course of the brand’s life.
While many new direct-to-consumer brands (think Casper) make their start on social platforms like Facebook, scale for these digital disruptors often requires adding television as the emotionally rich, scalable perception-builder. Disney could pose a threat here. But even these forms fail to reflect the rich engagement of Facebook’s platform built on its network effect. For these we are keeping an eye on radically new engagement platforms like Fortnite and Twitch which bring people together in totally new scenarios.
Because it seems users and advertisers need to be saved from themselves, the biggest buzz among marketers regarding Facebook is regulation. Whatever regulation gets Facebook in the end, it will end up costing Facebook, not just in term of dollars spent to comply (e.g., systems, resources) but also in terms of hindered agility. Facebook already admitted in its earnings call that dealing with security and privacy took its eye off the ball in terms of innovation and increased costs (does anything signal Facebook’s adulthood more than how often it referenced cost in this last earnings call?). Facebook’s challenge with regulation is not that it will hinder what it does today, but that it will cause it to miss what is next.