What Hearings? Advertisers Still Love Facebook

After 10 hours of verbal flogging by an incensed Congress, Facebook CEO Mark Zuckerberg seemed like a leader whose pedestal had cracked. Over and over during his testimony this week, he apologized for lapses in his company’s handling of user data. He emerged from the hearings with months’ worth of homework for him and his team.

But life’s not so bad for Zuckerberg. His exhaustive, highly publicized grilling appears to have had minimal impact on the one thing that ultimately gives Facebook its power: its popularity among advertisers.

“There’s still a very positive outlook from the industry overall and the belief that Facebook will continue to be a trustworthy partner,” says Angela Seits, director of social media and influencer marketing at the advertising agency PMG.

Not only do they see the platform as principled, “a couple of my clients have actually shifted more money towards Facebook,” says Shuman Sahu, director of performance media at ad agency Nina Hale.

With advertisers still eager to use Facebook’s services, the company’s business model stays intact and its dominance as a social network and an advertising behemoth remains assured. The few brands that have abandoned Facebook recently—Pep Boys, Mozilla, Sonos (for a week)—are just making a statement, says Brian Wieser, a senior analyst at Pivotal Research Group. “They’re thinking, here’s a good opportunity to say something about our values.”

Of course, Facebook is appealing to marketers only as long as people keep using the platform, which for the most part they are. A survey of Facebook users by Cowen Equity Research published Thursday found that people spent, on average, 53 minutes per day on the platform in the first quarter of 2018, down from 58 minutes a year earlier. Though the decline is significant, the report’s authors note that no other social platform comes close. Cowen’s data put Snapchat in second place with users spending 33 minutes per day on it, followed closely by Facebook-owned Instagram with 32 minutes.

“The vast majority of people on Facebook have very little knowledge,” of the company’s expansive data collection habits, says Steve Buors, cofounder and CEO of Reshift Media, a digital marketing company. “We’re talking about it, people in the industry are talking about it. But if you look at the average person, they are not talking about it nearly enough.” Though the #deleteFacebook movement gained enough momentum to attract celebrities like Steve Wozniak, Cher and Elon Musk, it hasn’t hit mainstream culture, a strong signal that the social network’s brand remains untarnished among the constituencies advertisers care about.

A big reason is most people never dig into—or care about—how Facebook makes money. It does so not only by collecting users’ actions and likes on the platform but by tracking their activity across the web. If a person clicks on a Facebook ad for a certain shop and later buys an item at that brand’s brick-and-mortar store, Facebook will likely find out. Users of its Messenger app will have their texts and phone call histories stowed away in the social network’s massive data centers.

All that data serves an overarching purpose: to connect people the world over, sure—but also to help advertisers place their ads in front of receptive audiences. The fees Facebook charges for the service fuels its unparalleled engine of prosperity. In 2017, Facebook amassed $40.6 billion in revenue, almost all of it from advertising, and analysts predict it will score approximately $55 billion this year.

Still, the backlash against Facebook and its peers over their privacy missteps is causing the tech giants to change how they handle users’ data. The EU’s General Data Protection Regulation, which goes into effect on May 25, has pushed Facebook to modify its rules around advertising in ways that will likely diminish its effectiveness in the short term. Among the changes, Facebook has promised to remove some options for targeting ads to specific groups, such as by age or race, to prohibit discrimination. Investigations by ProPublica found marketers could choose to only show housing ads to white users or exclude older people from seeing job ads.

Another change will hit a product called Custom Audiences, a tool wielded expertly by President Trump’s digital campaign. Marketers had long enjoyed the ability to plug an email list into Facebook’s advertising dashboard and produce a pool of Facebook users similar to the people on the email list, a useful way to target potential customers. Soon the rules will become stricter, requiring marketers to get explicit consent to use those email addresses. Many advertisers will have to shorten their email lists as a result, causing the pool of so-called lookalikes to shrink significantly. But even with these changes, Buors says, “They are so far ahead of other platforms in their tools and their specificity that they are still the best option.” “It’s the two billion users,” says Sahu. No other platform has the reach and the variety of ad formats that Facebook can offer, he says. Facebook and Google combined will account for more than 65 percent of digital ad revenue in 2018, estimates research firm eMarketer. Sahu likens the current moment to a milder version of YouTube’s image crisis a year ago, when companies boycotted the platform after their products showed up alongside hate speech and extremist content. But the downturn in advertising was soon reversed, and marketers today are once again happy to spend a significant chunk of their budgets on the video site. “Essentially, these platforms are too big to fail.”

That pedestal Zuckerberg occupies? Its cracks are healing as you read.

More Money, More Problems

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