It’s been nearly three months since the Cambridge Analytica revelations. We share what’s changed—and what hasn’t—about how users and advertisers feel about Facebook.
Users continue to express heightened concern about privacy, but few appear to have deleted their profiles. Facebook reported softness in user metrics in North America for Q1, but this was unlikely to be related to data privacy concerns.
Facebook’s many recent crises—data privacy, fake news, Russian meddling, unsafe content—are negatively impacting users’ perceptions of the platform, a trend which bears further watching.
In light of the above, we have moderated our growth forecast for time spent on Facebook among US adult users. We estimate they will spend an average of 42 minutes per day on Facebook, up 1.8% from 2017. That’s slower than the growth of 3.6% and 6.0% in the previous two years.
Facebook is making changes to its ad targeting products. On the user side, new features such as the ability to clear Facebook browsing history will impact some marketers’ ability to measure and analyze traffic to and from Facebook.
The largest concern right now relates to ad targeting, including the value of first-party vs. third-party data, and the ways marketers will be able to source third-party data going forward.
Advertisers appear to be holding steady on Q2 Facebook spending. However, some are using this as an opportunity to reevaluate how they use Facebook (and how much they use Facebook) going forward.
Advertisers are taking fresh looks at other social platforms, as well as non-social properties like Amazon. But at this point, there are few indications that significant spending will shift away from Facebook.
WHAT’S IN THIS REPORT? This report includes new user survey data, eMarketer’s latest forecast for time spent on Facebook and fresh insights from marketers on how they feel about Facebook now.
Usage Trends
Facebook’s strong usage trends reported in its Q1 2018 earnings report shouldn’t have been a surprise, given that the Cambridge Analytica revelations happened in mid-March, very close to the end of the quarter.
While usage in Asia is still strong, there is noticeable flatness in North America and slower growth in Europe and other parts of the world. The latter two regions will be especially important to watch in the coming quarters as the effects of the privacy investigations and the General Data Protection Regulation (GDPR) play out.
Surveys conducted in the US and Europe throughout March, April and May show that concerns about Facebook remain at a heightened level. But there is little evidence that mass quantities of users are deleting their profiles.
Key Stats: MAUs
Facebook reported it closed the first quarter with:
WORLDWIDE: 2.20 billion MAUs (monthly active users), up 13% year over year and 3.2% over Q4. User growth came primarily from Indonesia, India and Vietnam, the company said. They also reported 1.45 billion DAUs (daily active users) worldwide, or 66% of MAUs. That was unchanged from the past several quarters.
NORTH AMERICA: 241 million MAUs, up 3% YoY and 0.8% over Q4.
EUROPE: 377 million MAUs, up 6.5% YoY and 1.9% over Q4.
ASIA: 873 million MAUs, up 21.9% YoY and 5.4% over Q4.
REST OF THE WORLD: 705 million MAUs, up 11.6% YoY and 1.9% over Q4.
Challenges in Europe? David Wehner, Facebook’s chief financial officer, warned during the Q1 earnings call about potentially negative trends in Europe. “We believe that European MAU and DAU may be flat to slightly down sequentially in Q2 as a result of the GDPR rollout,” he said. If that happens, that would represent the first time the region has not grown quarter over quarter.
Time spent: The company did not provide any updates on time spent with Facebook during Q1 but did say efforts to shift usage away from passive behaviors (such as thumbing through a feed or watching videos), though still early, were showing positive trends.
Facebook had said earlier this year it had made changes to the platform in Q4 2017 that reduced total time spent by its worldwide users by 50 million hours per day. Specifically, it updated video recommendations to feature content that would drive interaction and engagement, rather than simply passive watching.
Facebook management has said it wants to find ways to keep its user base happy and engaged.
“We have a responsibility to keep our community safe and secure, and we're going to invest heavily to do that,” Mark Zuckerberg said during the earnings call. “At the same time, we also have a responsibility to keep moving forward and keep building tools that bring people together in meaningful new ways.”
But the developments of the past several months have put both users and marketers in an uncomfortable position: coming to terms with what data collection really means.
“The Cambridge Analytica revelations brought to light just how little brands and users really know about what giving over permission really means or enables data collectors to do,” said Dino Myers-Lamptey, UK managing director at MullenLowe Mediahub.
Time Spent Is Approaching a Plateau
In our recently published update on time spent with media, we forecast that US adults who use Facebook will spend an average of 42 minutes per day on the platform this year. While that’s 1 minute more than in 2017, the growth rate is slowing. By next year, time spent on Facebook will plateau to 43 minutes per day.
Consumers still use Facebook far more heavily than Snapchat or Instagram, the other two social platforms where we provide forecasts for time spent. This year, US adult Snapchat users will spend 27 minutes per day on the app, while Instagram users will spend 26 minutes on that app.
Facebook holds a significant share of US adults’ social network time. In 2018, it will account for 47.8% of daily social time, while Instagram will account for an additional 17.8%. Combined, the sister properties will log nearly two-thirds of social time.
Looking more specifically at time spent on Facebook within the past few months, recent third-party studies show positive trends—with a few caveats.
In April, AppOptix studied a panel of US Android mobile users and found that they spent nearly the same amount of daily time with the app in the two weeks before the Cambridge Analytica revelation on March 17 (an average of 54.36 minutes) as they did in the two weeks after (an average of 54.60 minutes).
In addition, the penetration rate (the percentage of panel users with the app) in the same two periods was 47.4% and 47.3%. “The conclusion is that users WERE NOT simply removing their data and deleting the app,” AppOptix wrote, emphasizing its point with capital letters.
comScore data cited in a Goldman Sachs report and referenced in a May 2018 Business Insider article also asserts that time spent on Facebook is rebounding after the Cambridge Analytica crisis. The article concluded that “[The number of] Facebook's US unique users on mobile rose 7% year on year to 188.6 million in April, when the scandal was biting hard. Time spent on Facebook also went up.”
However, it’s hard to draw conclusions from the data. While the comScore finding does show a drop of a few minutes in time spent per day in March compared to February, and a slight increase from March to April, there were similar drops and rebounds in the same time period in 2016 and 2017. In addition, changes in comScore’s methodology over the past couple years may also have affected the data.
Users Are Concerned, but Few Are Deleting Their Profile
We continue to monitor usage trends since we published our April 2018 report “Facebook Advertising 2018: eMarketer Tackles Big Questions on Usage, Privacy and Ad Targeting in the Wake of Cambridge Analytica.” While there are ongoing concerns about privacy and data usage, we believe the majority of these users will not follow through on deleting their profile. The more likely scenario is that they may use Facebook less or reduce the amount or type of information they share.
Here are highlights from some of the recent studies:
Ponemon Institute: Studies conducted by privacy researcher Ponemon Institute in the weeks after the Cambridge Analytica news broke found a dramatic drop in Facebook users’ belief that the company was committed to protecting their private information. In a study conducted in 2017, 79% of respondents agreed with that statement. In the survey conducted a week after the news broke, just 27% agreed. Trust rose to 33% in the second week but fell to 28% after Zuckerberg’s congressional testimony.
One week after Cambridge Analytica, Ponemon found that 9% of survey respondents had stopped using Facebook. However, 45% said they were not likely to stop, and 15% said there was “no chance” of stopping. As one respondent put it, “I am very disappointed in Facebook, but I’m willing to give the company a second chance,” according to an NBC News article discussing the study.
Adlucent: A study by digital marketing agency Adlucent in late April found that 83% of respondents—identified as US consumers who search and shop online and have at least one social media account—were more aware of their digital data after the congressional hearings, and 66% believed the hearings and media coverage “negatively impacted their perception of Facebook.” In light of that, 16% indicated they were planning to close their Facebook account.
Gallup: Gallup asked US Facebook users in April to assess their level of concern about Facebook-related privacy matters vs. other types of security concerns. More than half said they were very concerned about their personal information being sold to or used by other companies. Respondents were less likely to have the same level of concern for the broad concept of invasion of privacy, or for internet viruses.
It should be noted that Facebook doesn’t sell users’ personal information to other companies, so the wording in the study may have actually helped heighten users’ perceived concern.
Which?: A study from UK-based consumer organization Which?, conducted by Populus in late March, puts the thought processes of Facebook users in perspective. Of the UK users polled, just 6% said they had thought about deleting or deactivating their profile and had actually followed through with it. Nearly one-quarter thought about it and didn’t do it, and 60% didn’t even think about it.
Even though a very small percentage said they had deleted their profile, significantly higher percentages took other actions to reduce information they shared with Facebook. These are the sorts of changes in behavior that marketers should give close attention.
The most common reactions, cited by approximately a third of respondents, were to change privacy settings or restrict permission for the information the Facebook app was able to access on a user’s devices. Around one-fourth of respondents said they took other actions, including avoiding or stopping taking quizzes, restricting sharing their location or restricting/decreasing the number of status updates they shared.
Additionally, Thomson Reuters found that 44% of Facebook users polled in April had recently changed their privacy settings on Facebook. When asked why they were sharing less with friends and followers, 80% said it was because they had heard negative stories in the media, and 47% said they had privacy concerns.
Marketers should watch for signs of whether these behaviors become permanent, or if users decide to go back to their previous behaviors. So far, agency media experts who spoke with eMarketer have found no notable signs of change in usage—but most are watching the situation closely.
“Users have maintained how they use the platform and how frequently they [access] it. What's most important to us as marketers is the targeted reach conversation, and that those [capabilities] have not been impacted by any data misuse.” —Christy Clarke, paid social director, Goodway Group
“There's nothing right now that I can point to as massive changes [in usage or engagement]. It's certainly something that we're watching.” —Jessica Richards, executive vice president and managing director, Socialyse, a unit of Havas
“People are rightfully more suspicious of Facebook now, and possibly other providers like Facebook, but we haven't seen [that suspicion] impacting any of the user data we have.” —Christopher Hansen, chief product officer, IgnitionOne
Facebook also says that so far, users aren’t taking major steps to restrict data for ad targeting.
“If the majority of consumers were to clear their history [and] not consent to have any targeted advertising, it would fundamentally change our ability to actually do targeting on the product,” said Carolyn Everson, Facebook’s vice president of global marketing solutions. “But we're not seeing that in our initial tests and even the initial rollout of GDPR. Of course, some consumers are choosing to reduce their ability to be targeted, which we expected, but it's not in large quantities.”
Listen to eMarketer's podcast interview with Carolyn Everson:
User Perceptions Aren’t Great (but Aren’t Terrible, Either)
Even if users are not deleting their profiles, they are definitely viewing Facebook in a more negative light. But that’s not solely because of Cambridge Analytica—the incidents involving fake news and Russian election meddling also played a major role.
In its study conducted one week after The New York Times broke the Cambridge Analytica story, Ponemon found that respondents were significantly more likely than they were in 2017 to agree with statements showing concern about their privacy. For example, 66% said they agreed with the sentiment: “I have a right not to be tracked by Facebook.” (By comparison, 55% said so in 2017.) And in 2018, 60% agreed that “I have a right to control how my personal information is used by Facebook,” compared to 46% the prior year.
According to a study conducted in early April by YouGov and The Economist, only 24% of US internet users said they believe that Facebook will do enough to protect its users’ data in the future. More than four in 10 think Facebook will not do enough. The silver lining is that a third of respondents said they aren’t sure—which means that if Facebook executes well going forward, it could sway users toward a positive opinion. (And if it doesn’t, those users could shift the other direction.)
The study also found that a third of respondents didn’t trust social media companies’ ability to protect their data, and the same did not have very much trust. The level of distrust was lower among 18- to 29-year-olds and highest among those 65 and older.
But in spite of these frustrations, consumers do see value in the social platform. In an April 2018 survey by Recode and SurveyMonkey that asked US internet users to choose the company they believe has had the “most positive impact on society today,” Facebook ranked fourth (behind Amazon, Google and Apple). But it ranked ahead of other social platforms Twitter and Snap as well as ride-sharing companies Uber and Lyft.
And it’s important to remember that Facebook isn’t alone in having to deal with user mistrust and skepticism. A study conducted by Hubspot late last year put Facebook, Google and Twitter in similar territory when it came to the trustworthiness (or lack thereof) of their advertising after news came out that each platform displayed political ads that originated from Russia.
It offers a relevant comparison to the current situation surrounding Cambridge Analytica. Some 42% of respondents considered Facebook less trustworthy after that news broke (sound familiar?), 25% planned to use Facebook less (sound familiar?) and 16% planned to stop using Facebook (sound familiar?).
Would Users Pay for an Ad-Free Facebook?
Bloomberg reported in May that Facebook was conducting market research to evaluate the idea of offering an ad-free subscription service, something the company acknowledges it has explored in the past.
“We certainly thought about lots of other forms of monetization including subscriptions, and we'll always continue to consider everything,” COO Sheryl Sandberg said during the Q1 earnings call.
However, her boss Mark Zuckerberg has been less supportive of the idea, saying during the same earnings call, “We think that ads [are] a great business model that is aligned with our mission. We want to build a service that can help connect everyone around the world, so we want to offer that service for free and have it be affordable—and that's completely aligned with what we're trying to do.”
April 2018 research conducted by Recode and online survey company Toluna indicates that 23% of US internet users would be willing to pay for such a service.
How much would Facebook have to charge users to make up for lost ad revenues? We forecast that it will make $91.58 in average ad revenue per US user this year, which equates to a monthly subscription fee of $7.63. It is doubtful people would be willing to pay that much.
Outside the US, Facebook makes much less ad revenue per user, so an equivalent subscription fee in other markets would be lower. Still, the prospect of paying to use Facebook is something that we don’t expect many users to gravitate toward.
Advertising, App Developer and Data Privacy Changes
Facebook continues to make tweaks and changes to its ad targeting and developer tools, as well as to user privacy controls and ad transparency. Below, we recap the most important developments since our last report.
Marketers should expect many more changes as the year rolls on. And at the same time Facebook is dealing with its current issues, it is also moving forward with new ad products such as ads in Facebook Stories, which launched in May.
Advertising
Partner Categories: Facebook is shutting down Partner Categories, which incorporated third-party data from data brokers such as Acxiom and Oracle into the Facebook ads interface.
As of the end of May, the feature was no longer available in France, Germany and the UK, a move tied to the start of GDPR. In the other countries where the feature was available (including the US, Brazil, Australia and Japan), marketers will no longer be able to use Partner Categories for campaign creation, editing or duplication after July 2. The entire program will shut down October 1.
The biggest change in the wake of the shutdown is that “the responsibility for understanding and accepting the lineage of the data that you're bringing in—that onus has now moved to the advertiser as opposed to [Facebook]”, said Peter Randazzo, chief technology officer at Merkle Inc. “That is a substantial change.”
Custom Audiences: New terms for Custom Audiences took effect May 25, also timed to the start of GDPR. Now, advertisers must warrant that they have obtained the necessary rights and permissions to use the data they upload to Facebook to create a Custom Audience for ad targeting. Users who have opted out of having their data used for ad targeting must be removed from a Custom Audience. And any ad agency or partner that does this form of targeting on behalf of a marketer must also show that they have permission to do so.
For more on how advertisers are dealing with the closure of Partner Categories, see the section “How Are Advertisers Responding?” below.
Anti-discrimination in targeting: As of April 24, Facebook has removed thousands of categories of “exclusion” targeting, which allowed marketers to exclude users from ad targeting based on information such as their race, ethnicity, sexual orientation or religion. For ads offering housing, employment or credit, the advertiser will now see a prompt that they need to affirm they are following applicable laws and Facebook’s own anti-discrimination policy.
Facebook Stories: In May, Facebook began testing ads in Facebook Stories. It also announced that 150 million people view Stories on Facebook every day. The move follows the successful launch of ads in Instagram Stories over a year ago.
Developers/API
App audits: After the Cambridge Analytica revelations, Facebook said it would audit all apps that had access to large amounts of information about Facebook users prior to the company changing its app permissions in 2014. The process involves identifying the apps, asking the apps’ owners detailed questions about the apps, and may then lead to an audit depending on the response.
As of May 2018, “thousands of apps have been investigated and around 200 have been suspended” until Facebook can perform a more thorough investigation, Ime Archibong, Facebook’s vice president of product partnerships, wrote in a May blog post. Apps found to have misused data will be banned, he said.
API changes: In April, Facebook made a series of changes to its APIs (and Instagram’s as well) that limit developers’ access to data. Some of the changes affect the ability of apps to post or perform other actions on a user’s behalf, while others restrict the types of information about users that an app or website has access to. And if someone hasn’t used an app in 90 days, the app will no longer be able to access that person’s data unless the user re-authorizes the app. Some of these changes were triggered by GDPR.
Data Privacy and Ad Transparency
Facebook continues to roll out user education initiatives and new products to help consumers understand Facebook’s data practices, take more control of their data and learn about the ads they are seeing.
User education: An April 16 post explains the methods Facebook uses to track and collect information even when users are not accessing Facebook. It makes a specific point of telling users that other companies including Twitter, Google, Pinterest and Amazon offer similar tracking and log-in features.
Another post published April 23 describes the main ways advertisers target users on Facebook: based on information gleaned from their Facebook usage, information advertisers share with Facebook, and information websites and apps send to Facebook (such as by use of the Facebook Pixel). The post also reasserts that Facebook does not sell users’ data to advertisers and explains steps users can take to limit the usage of their data for advertising.
Clear History: Announced at f8 in May, the privacy control will allow users to clear their browsing history on Facebook, starting with information about the sites and apps they have visited. It’s similar to clearing a web browser’s history, and it will be available in a few months.
However, despite the positive news coverage the feature has received, Clear History does not remove the data; it only removes the associationbetween the data and the user. Facebook will still store the data; it just won’t associate it with the user.
Facebook says Clear History will not affect advertisers on Facebook.
“The information we have available to advertisers in the interface isn't going to change at all,” said Rob Goldman, Facebook’s vice president of ads. “The fact that we're not storing information about off-Facebook browsing behavior or usage of apps or whatever is not going to affect ads reporting.”
However, if users remove the information about their off-Facebook browsing, it will limit marketers’ ability to measure and then retarget those users.
The wild card is how many people will actually take the time to clear their history, and how often they might do it.
“The misuse of data is going to drive some users to lock down their privacy, but I think the majority will likely only clear their history once when the features roll out, if at all,” Goodway Group’s Clarke said.
Ad transparency: As of May 24, all election and issue ads on Facebook in the US will be labeled as “paid for” along with the name of the advertiser. The label will link to additional information about the advertiser, such as the campaign budget and demographics of who saw the ad (age, location and gender). This archived information will also be searchable by anyone in the world. In addition, political advertisers will need to verify their identity and location.
Facebook will try to identify and take action against those that abuse this policy, but it is also relying on users to notify the company if they see an ad that appears to be political in nature but not identified as such.
More broadly, Facebook says it is on track for the US rollout of an ad transparency center that lets users see all the ads an advertiser is running, even if they aren’t targeted to that user. The feature is currently live in Canada.
Facebook’s dating service: A test for privacy-aware socializing?
One of the biggest surprises of Facebook’s f8 conference in May was the announcement that the company is working on a dating service. At the time, many people criticized Facebook for sharing the news in the midst of the privacy investigations.
But it’s quite possible Facebook will try to use this dating service to prove it can provide the privacy controls with which the platform has historically struggled. Since privacy is such an important consideration for those who engage in online dating (especially those who don’t want their Facebook friends to know), if Facebook can successfully launch the service and maintain its users’ confidentiality, that could go a long way toward reassuring them about Facebook as a whole.
Notably, the dating service will not contain advertising, which will allow Facebook to avoid some data privacy issues, such as the use of personal information for ad targeting.
What Facebook's Top Ad Execs Say About Data Privacy
This May, we spoke separately to two of Facebook’s top ad executives: Carolyn Everson, who leads ad sales as vice president of global marketing solutions, and Rob Goldman, who leads ad product development as vice president of ads. Here are excerpts of those conversations that relate to consumers and of data privacy. In the section “How Are Advertisers Responding?” below, they discuss targeted advertising on Facebook.
We’re frustrated: For Facebook, the “confusion” and “misunderstanding” about the way Facebook uses data is “frustrating,” Goldman said. “For me, maybe the most frustrating aspect of the past several months, and especially of the congressional testimony we've seen, is the degree to which even well-informed experts are confused about how our platform works—how data is collected, what it's used for, what sort of transparency and controls people have around it. And as a result [there is] mistrust, which is really a shame. We just need to do better, and we will do better.”
It’s our fault: “You can click on the right-hand side of an ad on Facebook to know why you were sent that ad: what interests did we use, all of the online behavioral targeting, all of it,” Everson said. “Very few consumers knew that they could do that. That's not the consumer’s fault, that's our fault. We should have done a much better job at educating.”
Yes, we do want users to control their experience: “It's a common misconception that we don't want people to use our controls, and it's absolutely not the case,” Goldman said. “To the extent that you're seeing ads that you don't like, that is bad for everyone. It is not good for you, it is not good for the advertisers, it is not good for Facebook. We want people to exercise control over their ads, and any suggestion to the contrary is not the case.”
A joystick for ad privacy controls: “We've tried to build controls that are both powerful and simple, and I think we've failed at doing that, to be honest. We've probably leaned in favor of powerful, and [the controls] are not very well understood,” Goldman said. “The goal is to take this somewhat complicated set of controls and assemble them into to a joystick that works, so when you move it around your experience changes and you can feel what you're doing. And then people will feel the sense of control that they actually have.”
How Are Advertisers Responding?
Facebook’s strong performance in Q1 may lead people to think everything is business as usual, but in fact, the pending changes to ad targeting and user data controls are causing many marketers to be cautious about their future Facebook ad plans. They aren’t cutting spending or moving budgets just yet, but some are taking this as an opportunity to re-evaluate their commitment to Facebook going forward.
Q1 Was Strong, but That's Not Surprising
Facebook reported better-than-expected revenues in Q1 2018, which some took as a sign that the Cambridge Analytica revelations weren’t impacting advertisers’ use of the platform. However, that news broke less than two weeks before the end of the quarter, which means there was little chance that any ad changes would have affected results.
The company’s worldwide ad revenues rose 50.1% year over year to nearly $11.8 billion in Q1. In North America, Facebook’s largest region, ad revenues rose 44.4% to $5.56 billion.
However, Facebook acknowledged that any future limitations on data usage could impact its business, which is concerning. “Any change of the ability for us and our advertisers to use data can impact our optimizational potential at the margin, which could impact our ability to drive [ad] price improvements in the long run,” Wehner, Facebook’s CFO, said during the Q1 earnings call.
We forecast that Facebook will earn $48.85 billion in worldwide digital ad revenues this year, up 22.3% from 2017 but a significantly slower growth rate compared to last year’s 48.6%. That slowdown has more to do with Facebook’s size and the growth of other players, such as Amazon and over-the-top (OTT) video providers, rather than with advertisers abandoning Facebook or cutting back spending. Still, Facebook’s share of the global digital ad market is expected to rise to 17.9% this year, from 17.2% the year prior.
Several agencies and ad tech firms published reports in April and May that showed strong growth in Facebook ad spending among their respective client bases in Q1 2018. CPM ad pricing rose substantially on a year-over-year basis.
4C: Client spending on Facebook increased 62% YoY in Q1 2018. Average CPM was $5.12, down 18% over Q4, while average cost per click (CPC) was $0.48, down 21% over Q4. (The company did not provide a YoY comparison in its report.)
Marin Software: Social CPMs reached $3.08 in Q1, up 64.7% from $1.87 in Q1 2017. CPC rose 60% from $0.10 to $0.16. The study covered all client spending on social, but the majority took place on Facebook, according to Marin.
Merkle: Median ad spending on Facebook rose 48% YoY in Q1, while median spending on Instagram was up 62%. Merkle saw a 10% increase in CPC and a 70% increase in CPM on Facebook YoY.
Nanigans: Q1 ad spending was up 87% YoY among retailers who used Nanigans’ software to place Facebook ad buys in both quarters. Global CPMs were up 50% and CPC was up 38%.
Q2 Budgets Appear to Be Holding
Our conversations with a range of agency and marketer executives found no evidence of changes in Facebook ad spending for Q2. The comments below summarize the viewpoints we heard in our research:
“We haven't seen a dropoff in spending [among clients], but in fact the opposite. Even though there's been bad news reports every day, our [clients’] spend hasn't waned at all. In fact, we're planning to increase spend for our clients over the next quarter year on year.” —Greg Allum, global head of social media, Jellyfish
“Once the dust settled, we didn't see marketers pushing back in terms of wanting to dial back budgets. If anything we've seen an increase because marketers are seeing the value of the first-party data sets that we have. And then, Facebook just performs very well. It's consistent, and that's what marketers are looking for.” —Danny Kourianos, senior vice president, marketing, Rakuten Marketing
“Unlike Google’s issues of years past, Facebook has been impervious to spend concerns based on issues with privacy in the press.” —Justin Marshall, senior vice president, emerging services, Possible
In an April study from CNBC and SurveyMonkey, 50% of US small-business owners believed that government regulation of how companies such as Facebook use and distribute users’ personal data would make no difference in the effectiveness of the advertising. Just 26% thought it would make the ads less effective.
The Outlook for H2 2018 Is Less Clear
If marketers are giving Facebook an overall vote of confidence in Q2, there is less certainty that will continue into Q3 and Q4. All eyes are on the targeting changes and usage trends, leading most of the executives we spoke with to say they feel good, for now, but recognize the need to hedge their bets.
“If a platform like Facebook makes a change that has a dramatic effect on your business, you need to think, ‘Is this something that I want to give that control up for?’” For some advertisers, Facebook “became a crutch, and that crutch has now been shortened to a certain extent.”—Matt Naeger, chief strategy officer, Americas, Merkle Inc.
“The reason we're [on Facebook] is because our audience is there, and our audience wants to interact with brands and is seeking specific content. If our audience is no longer there, there will not be a need to invest in the same way we have historically.” —Jessica Richards, executive vice president, managing director, Socialyse
“For most clients, Facebook advertising is continuing to perform, however there is certainly a growing concern around brand safety, personal data distrust and the diminishing performance of earned brand communications.” —Dino Myers-Lamptey, UK managing director, MullenLowe Mediahub
“Facebook is still driving among the most efficient results of all platforms for all our clients, no matter the objective. We will continue to invest dollars based on addressable audience sizes and optimize our allocation across platforms accordingly if we see results change.” —Jeremy Leon, senior vice president, media, Laundry Service
“As Facebook continues to refine their ad offerings, scalability of audiences is something we will be watching closely.” —Brooke Skinner Ricketts, CMO, Cars.com
In May, Digiday reported that adidas was “pausing” video advertising on Facebook. The cuts were said to relate to questions of viewability and ROI, not the data privacy investigations. However, these types of questions are intertwined with data availability, and we expect more advertisers to ask those hard questions in the near future.
With the rollout of GDPR, some marketers may be a more cautious stance in general about using data for advertising. A small study of about 40 advertisers by investment bank UBS found that 31% do not plan to change their ad budget decisions in the next 12 months due to GDPR concerns, but 30% haven’t decided, according to a May 2018 Business Insider article about the UBS study.
The low number of advertisers queried means this study’s findings can’t easily be extrapolated, but it shows there is uncertainty in at least a few advertisers’ minds.
Advertisers and Agencies Scramble to Adjust to Targeting Changes
The primary issue advertisers have right now is adjusting to the changes in Facebook’s targeting capabilities, stemming from the upcoming closure of Partner Categories as well as changes related to GDPR.
Many sophisticated advertisers—the ones that have used Facebook’s segmentation and targeting tools to their fullest extent—are concerned about how they will fill in the gaps when the targeting tools they are familiar with are no longer available.
In addition, marketers and their agencies now have to develop new workflows and procedures for everything from the use and management of custom audience lists to the ownership of relationships with third-party data suppliers.
In some cases, the agencies want to take control, believing it to be a service to their clients. Some marketers, however, are pushing back because they want to retain control of the data and the data relationships.
“Facebook's ad tool made it easy to be able to select those audiences and be able to build out those segments,” Richards of Socialyse said. “Now, it's about the agency or the brand having those relationships. There is complexity to it because it's a change in the way you're working, and it's a change in setup.”
Some are frustrated because the changes are happening quickly, and it’s hard to keep up.
“Unless Facebook has a better [way] of communicating those changes, in a very consistent way, it is going to be hard for brands to keep up—not because they don't want to use the platforms, but because it starts to be a pain in the ass, and they don't have the resources to shift with all the changes that are happening,” said Angela Yang, director of connections at advertising agency T3.
Partner Data Is Still Available, but It’s Going to Cost You
The good news for marketers who relied on the third-party data Partner Categories provided is they can still use that data. The bad news is it’s no longer going to be available directly from Facebook, which means marketers (or their agencies) need to strike deals with the data brokers themselves.
Going forward, “we will have to pay third-party partners and create custom audiences for the same segments that today we're getting for free,” Clarke of Goodway Group said. “That's a little frustrating.”
The investment could end up being worth it, though, if it means a marketer’s own data becomes richer. Marketers could become “less reliant on Facebook as a platform and more reliant on what the needs are for [their] brand,” Richards said. “While we are now going through a process that we would not have foreseen we had to do with Facebook, it could in the long run be more valuable, because the way we use the data and build out our segmentation might be more comprehensive.”
Marketing technology firms such as 4C also see an opportunity and are touting new ways to target consumers without relying as heavily on user data. The company says its 4C Insights Affinity Graph product can avoid using user-level data by analyzing “public engagements with brand content on social media,” the company wrote in its Q1 2018 report.
Marketers Are Realizing Their Own Data Is More Important Than Ever
“Our most effective Facebook advertising uses our own first-party data,” Cars.com’s Ricketts said. “As Facebook evolves targeting, we are looking to further prioritize our own audiences to scale.”
Facebook’s deals with data brokers made it easy for marketers to take advantage of someone else’s data and use it for advertising. But Facebook has changed the playbook—just like it has so many other times before—and marketers have little choice but to adapt and get their own house in order.
“It's an example of what can happen when a platform like Facebook decides to change its policies,” Yang said. “Our clients are thinking about how they connect the dots between their email list and other CRM sources to be able to use that information to target their audiences. That's one of the biggest advertising concerns they have right now.”
The Goodway Group agency’s focus will be on “getting smarter with our first-party data and prioritizing the segmentation of that data,” Clarke said. Another goal is “using our first-party segments for lookalike targeting for prospecting, so that we're not relying heavily on third-party data.”
There Will Be More Scrutiny of Facebook’s Own User Data
While most of the attention so far has been on third-party data that is brought into Facebook, marketers should also be prepared for changes in the ways they can use and access Facebook’s own data. The company has gathered reams of information about its own users based on what users provide about themselves, their Facebook activities and other activities outside of Facebook. It also gathers data on people who are not Facebook users—a fact that has become more widely known as a result of the privacy investigations over the course of the past few months.
Facebook has said its data-gathering related to non-users is for the purpose of maintaining security on its platform. However, that argument may be tested in the coming months. During the congressional hearings and again in May during hearings in the European Union, legislators grilled Zuckerberg about that aspect of the company’s data-gathering.
In addition, as users make changes to their privacy and data-usage permissions, the amount and quality of information that Facebook has will change. On one hand, if users update the list of ad topics Facebook thinks they are interested in, they are in fact sharing more, not less, information with the company, which will create richer information sets. But if consumers decide to shut off retargeting or lessen access to their browsing data, that reduces what Facebook has to work with.
For now, ad execs express confidence in Facebook’s own data, and the belief that it is “as powerful as the third-party data that had been previously utilized,” as Laundry Service’s Leon put it.
Others worry that having to rely more on Facebook’s own data, as well as Google’s, will raise the walls of the walled garden even higher. Marketers are concerned “that with what's happened there's going to be more rows of brick laid in those walled gardens,” IgnitionOne’s Hansen said. “Both Facebook and Google are making it harder to get tracking information [for attribution]. From a privacy perspective and with GDPR, it's just going to cement that a little bit more firmly.”
What Facebook's Top Ad Execs Say About Ad Targeting
Below, Facebook ad execs Everson and Goldman answer more questions about advertising and targeting.
This is more than a Facebook issue: “Can targeted advertising and privacy coexist? We firmly believe it can, but it has to reach a much higher bar around educating consumers and giving them full control of how that advertising experience … plays out—not only on our platforms, [but] I would argue that this is an industry issue,” Everson said.
Yes, we can build a privacy-aware ad business: Facebook’s goal is to “help advertisers, but especially people, understand the commitments we made to privacy, and that we can build an advertising business that respects people's privacy at the same time,” Goldman said. “People need to be able to understand what is an ad, why they were targeted for the ad, what was the advertiser doing here. And if they don't like it, they should be able to control it.”
We know now that more communication is better: “We could have done more on both communicating with businesses as well as to consumers over the years,” Everson said. “We definitely have dialed up the level of communication around all of the changes and the policy changes. … If I could turn back the clock, I would have done a lot more of what I did in the past few months over the past handful of years.”
Data is now marketers’ responsibility: “We are just simply changing the way we work. We're going to have a first-party relationship with our advertisers, and they can be responsible for the data they bring on to the platform and how they get it,” Goldman said. “What they do with their data operation and how they maintain it is super important for their business in the future, and they should all be thinking about that. When they bring it onto the [Facebook] platform, we just want them to be responsible for it.”
It’s all about the business results: “Prior to any of what happened since Cambridge Analytica, I would say to any advertiser, ‘You should only be investing with us if we're actually driving a business result.’ I've said that for seven years and I will continue to say that,” Everson said.
Other Ad Platforms Are Getting More Attention
As marketers use the situation at Facebook to reevaluate their digital ad plans, they are showing new (or renewed) interest in Twitter and Snapchat, as well as properties like Pinterest and Amazon. Whether that expressed interest translates to actual ad budget shifts remains to be seen.
The fallout from the privacy developments “is helping us have meaningful conversations with clients [to say] that it's not just about Facebook or the Google network. There's a whole ecosystem you have to look at,” Allum of Jellyfish said.
Others, such as Yang of T3, agree. “We're looking to other platforms that are trying to make up some ground with what credibility may have been lost with Facebook. It's not something tangible that I can tell you from a metrics standpoint, but the overall feeling is, ‘All this is happening with Facebook. Now what? How are we thinking beyond just the platform itself?’ That is a feeling as we plan for the rest of the quarters in the year.”
As Amazon grows its ad business, it is also becoming more attractive to marketers that relied on the duopoly.
“Where we are seeing clients move money away from Facebook—and the duopoly, altogether—is toward Amazon’s ad products,” Possible’s Marshall said. “While not social, their inventory is not only unobtrusive, it can expand to many aspects of the Amazon ecosystem. And with the ability to target customers based on past purchase behavior, category interest and keywords, it’s quite a compelling—and distinct—alternative to Facebook.”
An advantage that the other platforms have, even if they can’t match Facebook’s size, is that users may feel more positively about them.
According to a global study by Business Insider Intelligence conducted in March and April, 58% of adult internet users said they were “not at all confident” that Facebook was protecting their data. Regarding Instagram, 40% felt the same.
Other social platforms fared better than the two Facebook properties. Just 19% said they were not at all confident that LinkedIn was protecting their privacy and data, with Snapchat at 30% and Twitter at 31%.
Key Takeaways
Although usage and advertising trends appear strong for now, a lot is still unknown about Facebook. We will revise our forecasts as more data becomes available. In the meantime, marketers should:
Be prepared for more changes. From ad targeting to data availability to app developers, Facebook is reviewing and revising its approach. Marketers need to be ready for more surprises.
Focus on attention metrics. Most people are concerned about whether people will stop using Facebook. While a small percentage might, the bigger possibility is that users will keep their accounts but change their behaviors. Whether that means sharing less, engaging less or limiting their time on the platform, it still adds up to a problem for Facebook.
Take another look at other platforms. Though few can rival the reach of Facebook, there could still be benefits to advertising in destinations where people feel more positive.
Put first-party data front and center. Using your own data will be easier, more cost-effective and less likely to cause privacy concerns.
