Tag Archive: Facebook

1. Meta versus TikTok: the battle for our attention

   April 25, 2022 12:34 Comments Off on Meta versus TikTok: the battle for our attention

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   For years, Facebook and Instagram have dominated our social media lives and, indeed, how we behave and interact across the internet. Facebook Meta has come to shape our online lives, and its influence is so vast that bodies such as the European Union and the US congress spend huge amounts of time and money working out how to exert control over it. But for all Meta’s dominance of our time and attention – and the ad dollars of millions of advertisers worldwide, its confidence appears to have been wobbled by an ‘upstart’ – TikTok. The Chinese-owned video-sharing platform soared in popularity during the pandemic and has morphed from a lip-synching and dancing app to one that creates trends and forges deep connections between creators and users, keeping the latter engaged video after video. And now, the cracks are starting to show at Facebook, which has just reported its first-ever decline in daily active users (DAUs). The battle between Meta and TikTok is on.

   Meta – the reigning monarch

   Facebook’s dominance of the social media industry is still undisputed. In Q4 of 2021 it boasted 2.9bn monthly active users – not far off half the Earth’s population. Meta, Google and Amazon together accounted for more than 74% of global digital ad spend in 2021 – which is more than 47% of all money spent on advertising in that period. Meta’s share of the digital ad market is 23.8%.

   But there are signs of trouble ahead for the social media giant – and signs that it is nervous too. It is facing a challenge in terms of both user numbers and advertising, reporting their first-ever quarterly decline in DAUs in the fourth quarter of 2021. Facebook lost around 500,000 daily users in the last three months of 2021. The number of monthly active users on Facebook stayed relatively flat, while growth across Meta’s other platforms – WhatsApp, Messenger and Instagram – was modest. Furthermore, Buzzfeed found that audiences are spending less time on Facebook. This decline in time spent on Meta’s platforms puts direct pressure on ad spend. That pressure is exacerbated by the economic pressure that many small businesses are facing as the world emerges from the Covid-19 pandemic; these small businesses make up a large part of Meta’s advertiser base and, if they are having to cut down on their ad spend, Meta’s ad revenue will inevitably suffer. Insider Intelligence has lowered its forecast or Meta, predicting that the company’s revenue will decrease by $2.5 billion in 2022 and 2023. The company’s share of digital ad spend will fall under 22% by 2023 – down from 25% in 2020.

   TikTok – the pretender to the throne

   The fact is, those daily users and ad dollars are going somewhere. In a rare direct nod to competition (quite possibly because of the various antitrust lawsuits that Meta is facing), Mark Zuckerberg emphasized the threat Meta faces from platforms such as TikTok and YouTube, as people are increasingly drawn toward short-form video content.

   YouTube has been big for a long time, but TikTok’s ascendancy over the last few years has been meteoric. It got its billionth user in 2021, just four years after its global launch; that’s half the amount of time it took Facebook, YouTube or Instagram, and three years faster than WhatsApp. TikTok was the world’s most downloaded app in 2020, and in 2021 it became the first app not owned by Meta to cross the 3 billion app download mark. Also in 2021, the typical TikTok user spent an average of 19.6 hours on the app every month – more or less equalling Facebook.

   And it’s not just user figures that suggest that TikTok is the one to watch. It is also the most lucrative app globally for in-app purchases. Users spent $850 million on TikTok’s virtual ‘Coins’ currency in the first quarter of 2022. What’s more, the company’s unique approach to social commerce, which involves pairing marketers with content creators, drives huge demand for products: the #TikTokMadeMeBuyIt hashtag has had over 11.5 billion views.

   All this is propelling TikTok’s ad revenue: in 2022, it is expected to bring in $11.64 billion – that’s triple its 2021 figure and more than Twitter ($5.58 billion) and Snapchat ($4.86 billion) combined. It’s still small in terms of share of the digital ad market – but Meta evidently still feels threatened.

   Meta and TikTok: A play for the crown

   TikTok’s huge growth in the last few years, its clever social commerce strategy and the fact that it is winning the battle for the hearts, minds and attention of under 25-year-olds (and indeed under-18s) – which happens to be where Facebook is suffering its most significant declines – means that Meta is paying attention and reacting accordingly. The tech giant needs to maintain its ad revenue until the metaverse – into which it has invested heavily – takes off (if it takes off). It does not want an ‘upstart’ like TikTok snapping at its heels.

   Meta’s reaction to the TikTok threat seems to be “if you can’t beat ‘em, join ‘em”. Its Reels product is a direct rival to TikTok’s short-form video format. Mark Zuckerberg admitted in an earnings call that Reels is a major part of Meta’s TikTok defence strategy. They are also exploring the introduction of virtual coins on Facebook and Instagram, nicknamed ‘Zuck Bucks’. It is, however, interesting that Meta’s investment in these projects has been limited – especially given that Zuckerberg has form for investing in projects that he does believe in, such as the metaverse.

   However, Meta is not just using product innovation or imitation in order to keep the TikTok threat at bay. It was revealed recently that it hired a Republican consulting firm in the US to seed public distrust around TikTok. Op-ed and letters to the editor in various local publications have expressed concern that TikTok poses a danger to American children – particularly in relation to the fact that it is Chinese-owned and holds an extraordinary amount of data on teenagers across the world. Meta has defended the campaign and its actions, saying that it believes that all platforms should face scrutiny consistent with their size and success. The eagle-eyed have noted, however, that the thought-pieces in question have criticized trends that have gone viral on TikTok – but originated on Facebook and Instagram.

   The political angle

   Given Meta is a huge American tech company, and TikTok a huge Chinese one, it’s impossible to discuss this matter without touching on global politics. There is a tendency in the West to see the West as a bastion of democracy, free speech and freedom – and to see the ‘rest of the world’ but particularly China and Russia as restrictive, non-democratic and, in the case of Russia, outright aggressive. The fact that TikTok is Chinese owned may well have an impact on its future in the West. The app is already banned in India, and many other countries have considered banning it; the Trump administration in the US toyed with the idea of forcing the sale of the American business to an American company, but this idea was dropped after Trump lost the 2020 election. TikTok collects an enormous amount of data – it is, for example, using facial and voice recognition, even in the US. The fear is that the governing Chinese Communist Party (CPC) will use this very private data to its advantage – and given that they are closely involved in all major Chinese companies, it’s naïve to believe they are not doing this.

   That said, the West also has access to a staggering amount of data. The US can access all data that passes through servers in the US, and the data offered by data brokers from cookie and app data gives anyone who wants it far more intelligence on our behavior than we could reasonably expect them to have – and both the West and the East can use and abuse that data.

   These data flows are likely unsustainable in the long-term – individuals and regulatory bodies will demand more privacy in the future, even if market changes are slow to catch up. We are already seeing increased scrutiny on Meta in the US, the EU and beyond – TikTok will undoubtedly not be immune to it.

   So – is the future TikTok’s?

   While Meta is still by far the biggest social media company, and has a huge percentage share of the digital ad spend market, dwarfing TikTok’s, it is obviously flustered by TikTok’s success, especially when compared to its own stagnating and even declining figures. Facebook has more users, but TikTok has the attention of the demographic that advertisers most want to target and form a relationship with. Both companies will continue to be scrutinized for how they handle data and privacy – we all know the level of scrutiny that Meta faces, and TikTok – being Chinese-owned – will need to get used to a similar level of enquiry.

   For the last couple of decades, Facebook has had huge influence on how people across the world behave on the internet and even off it. It has changed how we interact, how we discover news, brands and products, even how we speak. But with young people devouring short-form video, interacting with creators and buying socially, it looks like the next two decades could well belong to TikTok. And marketers – particularly, but not exclusively, those who want to target a younger audience – should make plenty of space in their marketing plans for the Chinese-owned platform.

   Header image: Kaspars Grinvalds/Shutterstock

2. Are Big Tech’s Q2 results too good?

   August 7, 2020 12:06 Comments Off on Are Big Tech’s Q2 results too good?

   Across the world, national economies are in deep recession, businesses are folding and unemployment has soared. The coronavirus pandemic has wreaked havoc for so many, yet there is a subset of the global economy which demonstrates extraordinary resilience.  

   The tech giants release their Q2 2020 results

   On Thursday last week, amid much anticipation, the Big Tech big four released their second-quarter results. They would have been impressive in the pre-Covid world, but in the current context they were nothing short of astonishing. Facebook reported an 11% growth in revenue year on year, to $18.7 billion, and its profit doubled to $5.18 billion; its number of monthly active users (MAU) rose 12% to 2.7 billion. Amazon posted a record profit of $5.2billion, with sales rising 40% to $88.9 billion, while Apple’s profit rose 12% to $11.25 billion, and its revenue by 10% to $59.69 billion, thanks partly to a 1% increase in iPhone sales. Alphabet, Google’s parent company, reported a profit of $7 billion, which was down on the year, but still above the share price expected by Wall Street ($10.13 a share vs $8.21).  

   A great quarter for Facebook

   Despite the negative publicity that Facebook suffered following the #StopHateForProfit campaign and subsequent boycott of the platform by some of the world’s largest advertisers, the second quarter of 2020 was a great one for the social media giant, from a financial perspective. Revenue growth slowed, but it was still far greater than what analysts on Wall Street predicted. The financial success and growth in both monthly and daily active users signal that people and businesses used Facebook to stay in touch with loved ones and customers in the spring, when much of the world was in lockdown because of the pandemic. Facebook states that 180 million businesses use their tools, and it has 9 million active advertisers; this well-established longtail of smaller advertisers goes a long way to explaining why the July boycott wasn’t financially damaging to the platform, although it was very challenging from a PR perspective. Facebook is strengthening its relationship with its small business advertisers with the launch of two new initiatives, Facebook Shops and in-messenger commerce. 

   Strong performances from Apple, Amazon and Alphabet

   The other three components of the Big Four also enjoyed remarkable success in Q2. While Alphabet’s ad revenue was down, many analysts believe that this was largely because it came from a much larger base than Facebook’s, for example. YouTube’s ad revenue increased by 5.8% to $3.8 billion, which was much slower than its Q1 performance but still impressive given the context, namely many advertisers halting their ad spend. 

   Amazon, possibly unsurprisingly with so many people stuck at home, had a strong second quarter, with a record profit of $5.2 billion and growth of more than 40% in its division that is largely comprised of its ad sales business. The retail giant brought in revenue of more than $7 billion more than expected, despite initially being caught off guard by a sudden spike in demand during the pandemic, as more people chose to shop from the safety of their homes. It says it is currently expanding its fulfilment centres as it prepares for the peak holiday shopping season at the end of the year. 

   Despite store closures and operations disrupted by the pandemic, Apple’s revenue was the highest the company has ever reported in its second quarter, up 11% year on year. This rise is due largely to a 1% increase in iPhone sales, helped by the launch of the lower-cost iPhone SE. 

   Results that good don’t look good

   The tech giants and investors will undoubtedly be pleased with their performance in the second quarter, particularly given the economic context, but there is a fly in the ointment. Results this great, when so much of the world is in a downward spiral, are difficult to justify, and do nothing to quell suspicions that the Big Four are far too powerful, with too large a monopoly on the marketplace. Just the day before the Q2 results were released, the CEOs of Apple, Facebook, Alphabet and Amazon appeared before the US Congress’ antitrust hearing, as a culmination of 13 months of investigation by lawmakers into the market power of Big Tech. The key criticism against the four companies is that they have engaged in anti-competitive behaviour, using their power to choke the ability of their smaller rivals to compete with them. The investigation will produce a report after the hearing, which will be released towards the end of the year and will form the basis of new laws to regulate Silicon Valley.  

   Each of the CEOs – Tim Cook, Mark Zuckerberg, Sundar Pichai and Jeff Bezos – tried to downplay the scale of their market leadership to Congress on July 29th. But their efforts were undermined by their huge earnings released just the next day, which not only underscore how reliant people became on Big Tech during the pandemic, but also symbolise how powerful these companies are and their ability to see off smaller competitors.  

   An awareness of perception issues

   Each company was acutely aware of the optics of their Q2 results. Amazon’s press release went out of its way to detail the ways in which it contributes to communities and its employees. Tim Cook said that Apple was conscious that its results contrasted sharply with the fortunes of so many others over the last few months, and that the company doesn’t have a zero-sum approach to prosperity, while Mark Zuckerberg highlighted his belief that Facebook’s products have changed the world for the better and improved people’s lives. Whether these statements will have any bearing on Congress’ conclusions remains to be seen. 

   Is Big Tech on notice?

   It’s very likely that the Big Four’s remarkable Q2 results will feed into Congress’ belief that they are too powerful; indeed, they – along with Microsoft – currently represent more than a fifth of the S&P 500, the first time since the 1980s that the five largest companies have had such a large share of the index. Congress lawmakers will inevitably seek to curtail that power to an extent, as it is in direct contrast with American antitrust laws. It will be fascinating to see what the implications for the Big Four, the tech sector and advertisers will be. 

   Image: Hand Robot / Shutterstock

3. The Facebook boycott: what are the implications for brands and for Facebook itself?

   July 2, 2020 17:07 Comments Off on The Facebook boycott: what are the implications for brands and for Facebook itself?

   Facebook has faced significant challenges over the last few years, notably since 2016, which saw the tech giant embroiled in controversies relating to the election of President Trump in the US, and to the UK’s Brexit referendum. 2020 is not proving to be any easier.

   The world’s largest brands boycott the world’s largest social media platform

   The current controversy was sparked when President Trump reacted to the Black Lives Matters demonstrations in a post on Twitter and Facebook, which he ended with the phrase ‘when the looting starts, the shooting starts’. Twitter reacted by hiding the post behind a warning that it ‘glorified violence’; Facebook, on the other hand, did nothing, with Zuckerberg saying that it was “better to have this discussion out in the open”.

   Shortly after this debate, a consortium of civil rights groups started urging advertisers to reduce or even halt their spending on Facebook throughout July, under the #StopHateForProfit hashtag. The campaign gathered momentum, peaking with Unilever’s announcement last Friday (June 26^th) that they would cease all their US advertising on Facebook until the end of the year. Within two hours of the announcement, Mark Zuckerberg released plans to prohibit hate speech ads and to better protect groups such as immigrants on Facebook. He also said that the platform, undoubtedly with one eye on President Trump, would label posts that violate their policies but need to remain published ‘in the public interest’.

   Facebook’s changes weren’t enough

   But Zuckerberg’s pledges weren’t sufficient to stem the flow: over the weekend and into the beginning of this week, more and more brands announced they would be joining the boycott. Facebook is now facing the loss, at least temporarily, of income from 150 brands as large as Verizon, Starbucks, Adidas, Coca-Cola and Honda – as well as Unilever of course. To give an idea of the amount of money this means, Unilever and Verizon spent $850,000 and $504,000 respectively on Facebook in the first three weeks of June alone. The World Federation of Advertisers claims that a third of the world’s biggest brands will, or are likely to, suspend advertising on social media, while an additional 40% are undecided.

   What are the implications for Facebook?
   

   The loss of income because of the boycott will undoubtedly be a real blow for Facebook – but by no means a fatal one. The majority of its income comes from the longtail: eight million small and medium-sized companies who are priced out of TV and therefore can’t afford not to advertise on Facebook. However, Facebook’s share price was affected by the boycott, down by 10% to $212.50 over the course of the week to June 28^th. They have no choice but to closely consider their next steps, particularly ahead of what is sure to be a contentious presidential election in November.

   The Facebook boycott was catalysed by the Black Lives Matter movement, but came amid a context of haphazard policing of the site. Facebook’s stance on hate speech has long been less clear than its position on other controversial content such as nudity; this is partly because it believes that it shouldn’t be responsible for this content, and partly because it’s so much more difficult to automate this work. It has made significant progress in this area: according to its Community Standards Report, in 2017, Facebook identified just 25% of hate speech removed from the platform itself, relying on users to flag the other 75%. By the spring of this year, however, 88% of the hate speech removed was found with its own tools, meaning it could remove or restrict four times as much as it had two years earlier.

   Facebook, and many of the other social media companies, continue to maintain that they are tech platforms, not media platforms, with the limited responsibility for content that that status implies. However, in introducing measures such as those described above, they are arguably de facto admitting that they are publishers and therefore have a duty to ensure that their content abides by local and international laws.

   What is motivating brands to boycott Facebook?

   Facebook has long been a key advertising platform for brands, giving them access to billions of users across the planet. Boycotting the company as part of the #StopHateForProfit campaign is a very sound PR move, and a great example of the world’s largest corporations using their power for good – in this case, holding social media companies to account. Advertising budgets for many brands, especially travel and consumer goods brands, are shrinking as the world faces an almost certain recession following the coronavirus pandemic. They will be seeking to make cuts and the #StopHateForProfit campaign may have presented an opportune moment to start making those cuts whilst simultaneously spurring change. What’s more, media cost deflation for most traditional media types and lower-than-expected inflation for digital channels mean that advertisers may feel they are in a strong position regarding where they place their advertising spend, allowing them to boycott a previously key channel. However, it’s important to remember that, while this move by advertisers may have been partially instigated by the fall-out from Covid-19 crisis, digital is a key channel and has become even more so during the pandemic as billions seek entertainment and information at home – this is a big move. Some brands will also undoubtedly use their break from the platform to evaluate the impact that Facebook activity has on their marketing results. In short, the move by marketers to boycott Facebook is both altruistic and strategic: it will be fascinating to see how it pans out.

   Brands have long been uneasy about advertising on Facebook, thanks to historical brand safety issues and because they are worried about contributing to the consolidation of the Facebook-Google duopoly. No matter what the reasons or motivations for the boycott, perhaps now is the time that Facebook will be forced to implement fundamental change to the platform, including allowing marketers to better control where their ads are placed, and making the algorithms that control content more transparent.

   Image: BlueSkyImage / Shutterstock

4. Facebook: the changing fortunes of a tech titan

   November 27, 2019 11:47 Comments Off on Facebook: the changing fortunes of a tech titan

   It is not so long ago that Facebook’s halo shone brightly. It was apparently created with the most laudable principles in mind: to connect people and to create communities around issues that people care about. For advertisers, it provided the holy grail of being able to create highly targeted ads and deliver them to the right user at the right time.

   But then it all went wrong. The company has been buffeted by a series of major privacy and security scandals on a seemingly almost monthly basis. Its reputation has plummeted in inverse proportion to the number of negative headlines it has received. Is this the beginning of the end for Facebook? And is it still a brand safe platform for advertisers?

   What’s gone wrong for Facebook?
   

   What hasn’t? The real troubles started in 2016, when Facebook faced accusations that it had allowed external forces to interfere in the UK’s Brexit referendum and the US presidential election, as well as allowing the spread of misinformation. Then, of course, came the Cambridge Analytica scandal where a whistle blower claimed that the data analytics firm working with Donald Trump’s election campaign had been given access to the personal information of up to 50 million individuals in order to target them with personalised political ads.

   That saw the opening of the floodgates: in the last 18 months there have been multiple scandals, including claims of sensitive data being given or offered to third parties such as Spotify, Netflix and a Russian email service linked to a close associate of Vladimir Putin; the spreading of fake news; the enabling gender and racial discrimination in job and housing ads; the hacking of 30 million accounts; the inflation of video view metrics; and a smear campaign to silence or discredit prominent Facebook critics. Most recently it emerged that Facebook is still leaking data to third parties, and last week it was in trouble for refusing to follow rival Twitter’s lead and limit or ban political ads.

   A sharp decline in corporate reputation

   This scandals and controversies have had severe reputational ramifications for Facebook. It now has an exceptionally low reputational score in the Reputation Institute’s US RepTrak ranking, below even a cigarette company. This, according to the Reputation Institute, is because of Facebook’s response to these crises, rather than just the crises themselves: Mark Zuckerberg and his leadership team have always focused on trying to protect their image, rather than their reputation.

   Is Facebook still a good option for advertisers?

   Of course, many of these issues are rooted in the fact that Facebook makes the lion’s share of its revenue from its advertising business: last year, 98% of their global revenue was generated from advertising. User data is at the heart of the product it offers advertisers. But will their problems have any impact on marketers? There are queries around a decrease in the number of active users, as well as in the quality, effectiveness and reliability of consumer data – and, of course, whether continuing to use Facebook’s advertising products insinuates that you are ok with their behaviour. However, it would be safe to assume that the many people who still use Facebook – and their number is in fact increasing – aren’t unduly bothered by the scandals that the platform has faced. Furthermore, while Facebook is taking steps to improve privacy and security, they will always ensure that their product offering – their core income – stays useful and relevant to advertisers. Marketers should focus on ensuring that their advertising stays relevant, diverse and emphasises the brand’s commitment to data security and privacy. It is also worth thinking deeply about what targeted advertising contributes to your marketing strategy: are you actually accessing new customers, or just those who would already buy your products?

   Thanks to Facebook’s reliance on advertising revenue, advertisers are in a position of great power. They could use this to great effect: by teaming up with agencies and advertising bodies they could make it clear to advertising platforms such as Facebook exactly what they expect in terms of privacy and data usage. In the face of such a unity of strength, could they refuse to comply?

   How can Facebook win back the trust of its advertisers and users?

   As for Facebook themselves, they must continue to focus on the issues of trust that currently surround its brand: it must be honest and transparent with both users and advertisers, and identify effective ways to eliminate the preponderance of fake news that still litters its platform.

   Facebook has undeniably played a key role in the targeted advertising revolution, but to maintain its status it has a lot of soul-searching to do.

   Image: Shutterstock

5. Is Snap really a threat to the Google-Facebook duopoly?

   November 13, 2019 10:15 Comments Off on Is Snap really a threat to the Google-Facebook duopoly?

   A few weeks ago we wrote about how Amazon poses a serious threat to Google’s search dominance. But Amazon is just one of a few companies snapping at the heels of the Google-Facebook duopoly that has for so long dominated digital advertising. Third quarter results, released in the last few weeks, revealed that the ad businesses of Amazon, Pinterest and Snap all grew more rapidly than that of the industry giants in Q3. Amazon is the biggest disruptor in terms of size, but it’s Snap – owners of Snapchat – that is enjoying the fastest growth.

   Snap’s growth is remarkable
   

   The latest round of quarterly results were not a resounding success for Facebook or Google. While Facebook’s results were better than expected, it recorded its third consecutive quarter of sub-30% expansion; meanwhile, Google’s growth is languishing below 20%, at 17.1%.

   Things were much brighter for Snap: its ad business grew 50% year on year in Q3, and its stock price surged by over 175% this year as advertisers increasingly look to the platform to provide a return on their investment. Why?

   What is behind Snap’s success?

   Snap’s CEO, Evan Spiegel, has credited two major changes at the company for their success. The first is an initially poorly received redesign which Spiegel says boosted time spent watching premium content by 40%, thereby increasing ad revenue; the second is their adoption of a self-serve ad platform over the last two years, which has made it easier for brands to buy ads on the platform and expanded Snap’s ability to sell ads.

   Those ads are increasingly popular as Snap is good at leveraging its hard-to-reach audience and building innovative, intuitive ad products that increase ROI for advertisers. Its core userbase is the often hard-to-engage youth audience: 90% of 13-24 year-olds in the US say that they use Snapchat, and they’re highly engaged – they open the app on average 20 times a day, and dwell time is around 25-30 minutes, significantly longer than that of other social networks. All this gives brands plentiful opportunities to reach their audiences at the right time, with the right message – and that amounts to increased ad revenue for Snap.

   Snap’s range of ad products come in a range of different formats, including Snap ads which allow users to swipe up to visit the advertiser’s website or app and can be optimised against reach, clicks and sales; and commercials, a more premium offering which are unskippable and appear within premium content. They feel more like a TV buy for advertisers and have high viewability and completion rates. In October, Snap launched a new product to target direct-response advertisers, for whom Instagram – their historical home – is starting to feel a bit crowded. Its new dynamic ads allow advertisers to create ads linked directly to their product catalogues and can be served to users based on their interests, using a variety of templates created for mobile. This new product brings Snap’s offering more in line with that of its bigger competitors, and is one of a range of features that has helped to make Snapchat more shoppable, engaging and effective for marketers.

   Snap’s focus on the development of effective advertising formats is commendable, and will be key to its future success; indeed, it will be key to the success of the digital advertising industry as a whole. Traditional channels continue to have the upper hand when it comes to the price-effect ratio, and digital players must aim to emulate their success.

   AR is key to Snap’s future success

   While Snap’s star is certainly in the ascendant, there is still plenty of work to be done: it is still unprofitable and it only has 210 million daily active users – mediocre compared to the 500 million who use Instagram’s Stories product every day. CEO Spiegel stated on the quarterly earnings call last month that augmented reality (AR) will be crucial for the company’s future: each daily active user interacts with a Snap AR product, such as lenses and filters, an average of 30 times per day. This month the company is launching Spectacles 3, a redesigned version of its augmented reality sunglasses, and in the next seven to 10 years plans to integrate other AR wearables into its range. Snap has historically led the way in AR and has had viral success with some of its AR filters, but Instagram and Facebook are moving into the space, so Snap will need to move quickly to retain its first mover advantage and remain the dominant AR platform.

   So, is Snap a serious threat to Google and Facebook?

   Snap’s product development and innovation are turning it into a serious contender for advertisers’ ad dollars, and its growth rate means that the digital advertising giants – Google, Facebook and increasingly Amazon – need to pay attention, particularly as Snap has such high access to the millennial and Generation Z audience. It does however have a lot of work to do if it is to grow exponentially and become a real threat.

   Image: Shutterstock

6. Amazon is coming for your ad dollars

   October 11, 2018 14:50 Comments Off on Amazon is coming for your ad dollars

   The online shopping platform has streamlined its advertising offering, making it a real threat for Google and Facebook.

   Turning the duopoly into a triopoly

   When we think of major digital ad platforms, our thoughts naturally turn to the giants, Google and Facebook. There is no doubting that for many years the ‘big two’ have had a duopoly of advertisers’ digital budgets across much of the world. Google’s ad revenue in quarter two of this year was a huge $28 billion, while Facebook’s was a smaller but still very sizeable $13 billion, of which 15% was generated by Instagram. We’ve discussed in our blog before how Facebook seems to be struggling to grow in the face of privacy scandals and user stagnation and, conversely, how Google appears to go from strength to strength.

   However, there is a third player that’s turning the duopoly into a triopoly. A report published by eMarketer in September revealed that Amazon will more than double its US digital ad revenues this year, meaning it will overtake Oath and Microsoft to become the third largest digital advertising platform. This news came as Amazon revealed that it had streamlined its somewhat messy advertising offering into a single brand, Amazon Advertising.

   Amazon’s key advantage is its deep understanding of consumer purchasing habits

   Amazon Advertising’s model is based on the fact that around 49% of product searches in the US start on Amazon – and that offers invaluable insights into the minds of purchasers. While Google can store your implicit shopping intention, Amazon knows your actual purchasing behaviour – what you bought, when you bought it, how many clicks it took you and what other product categories you bought or considered at the same time. These insights can be used to create intelligent retargeting campaigns that showcases products that the consumer is more likely to buy at a specific time. With the drive towards Amazon Prime and the purchase of Whole Foods, those insights can become even more pertinent. Furthermore, ads on Amazon can be optimised within a matter of hours, allowing advertisers to drive a much higher return on their investment.

   Advertisers are moving budgets from Google search into Amazon ads

   It is these razor-sharp insights and real-time optimisation that are the headache for Google and Facebook, particularly the latter. Media agency executives have revealed that some

   advertisers are moving more than half the budget that they would normally invest with Google Search (an estimated 83% of Google’s ad revenues) into Amazon ads, amounting to hundreds of millions of dollars. The brands in question are almost all from the consumer product goods category, whose products are sold on the Amazon platform, and are attracted by the offering discussed above as well as the seamless shopping experience: there’s no need to set up an account or input card details, as there might be with a Google search ad. Amazon is also unburdened by the fake news problems that have dogged Facebook and, as an apolitical space, it is unlikely to be leveraged as a political tool.

   Will the lure of profit be at the expense of user experience?

   It’s possible, even likely that Amazon will be bewitched by the huge profits that can be won from advertising, at the expense of the user experience. The purchasing behaviour data that Amazon has at its fingertips means that they can develop much better targeting tools than Facebook – and just as good as Google’s. Highly effective branding campaigns therefore become a reality, and while the consumer could find these at best a distraction and at worst disturbing, it will be difficult for Amazon to resist short-term profit for something in which it is unbeatable.

   Google and Facebook are safe for now – but challenging times are ahead

   Google and Facebook aren’t in any immediate danger. Amazon is a distant third in the triopoly: it commands 4.1% of digital ad spend in the US, compared to Facebook’s 20.6% and Google’s 37.1%. And while Google’s Search revenues may be flattening somewhat, some of the drift is going into other Google properties such as YouTube, and not just Amazon’s coffers. Furthermore, brands from very lucrative advertising categories such as automotive and travel don’t currently have much incentive to move any investment to Amazon as their products are not easily sellable on the platform.

   Challenging times are ahead for Google and Facebook, in this and many respects. Amazon is certainly one to watch in this space.

   Thumbnail image: Shutterstock

7. Facebook’s woes show no sign of abating

   October 4, 2018 10:48 Comments Off on Facebook’s woes show no sign of abating

   A massive security breach is just the latest chapter in a bad year for the tech giant.

   After a bad year, Facebook needed to regain its users’ trust

   The fourth quarter of 2018 started at the beginning of this week, and there are probably few people who are looking forward to turning their backs on 2018 more than Mark Zuckerberg. This year has been something of an ‘annus horribilis’ for the Facebook CEO. Having perhaps thought that the worst was behind him with Russian interference in the US presidential campaign, the social media platform was hit with accusations that it had allowed Cambridge Analytica, a political consulting firm, to harvest data from up to 87 million Facebook users. Cambridge Analytica then used that data in the campaign that helped elect Donald Trump to the US presidency. This, along with the introduction of GDPR in the European Union, was blamed for Facebook losing daily active users in Europe, flatlining in North America and the resultant slow-down in revenue growth in Q2 of this year. The conclusion? Facebook needed to work on regaining its users’ trust in order to guarantee its future prosperity.

   And then, 50 million user accounts are hacked

   Unfortunately, things sometimes don’t go according to plan. Last week, Facebook discovered its most severe security breach to date, impacting 50 million user accounts. The ‘view as’ tool lets users understand their privacy settings: a bug allowed hackers to use this functionality to take over user accounts, meaning they could see everything in the user’s profile and, potentially, in any third party sites that users logged into with their Facebook accounts, for example Tinder, Airbnb and Spotify. Facebook acted to secure these accounts but the damage has been done: Zuckerberg said ‘I’m glad that we found this and were able to fix the vulnerability, but it is definitely an issue that it happened in the first place.’ What’s more, this is the second serious security breach for Facebook in recent months – in June, a bug made 14 million people’s private posts publicly viewable to anyone.

   A test of the EU’s GDPR

   While it is estimated that only 10% of users affected by this month’s breach were in the European Union, it is the EU that is the biggest headache for Facebook in this saga. GDPR requires companies that store the data of European citizens to declare any security breaches of this nature within 72 hours: Facebook notified the Irish Data Protection Commission which is now assessing whether it needs to carry out an enquiry. If it does, and Facebook is found to have been negligent in its duty of care for customer data, it could face a maximum fine of 4% of its annual global turnover – $1.63 billion. This is the first major test of GDPR, but the EU does have form for implementing large penalties to tech companies. It fined Google $2.8bn in 2017 for violating antitrust rules with its online shopping practices, and earlier this year slapped the tech giant with a $5 billion fine for abusing its power to force smartphone operators to pre-install Google search apps on any phone using the Android operating system.

   A battle on many fronts

   Facebook is under fire from many fronts – federal investigations into its privacy and data-sharing practices, the possibility of increased regulation from the US congress following high-profile hearings on the privacy practices of the big tech companies – and now this latest fiasco.

   Regain trust to keep advertisers

   The priority for Zuckerberg as he looks to 2019 and beyond must be to regain the trust of users around the world. Consumers are increasingly wary of the big tech companies and how they use their data, and if they start to log off in their droves, advertising dollars will follow them.

   Thumbnail image: Shutterstock

8. In the news this week: Comcast wins Sky bid, and Instagram founders resign

   September 28, 2018 13:07 Comments Off on In the news this week: Comcast wins Sky bid, and Instagram founders resign

   There’s never a quiet moment in the media industry, and this week was no exception, with two major pieces of news that could have major ramifications for advertisers, albeit in very different ways.

   Comcast gains full control of Sky

   On 22^ndSeptember, it was announced that Comcast, the American telecommunications giant that offers digital cable TV, internet and telephony services, had won the bidding for Sky, at a cost of $38.8 billion, beating 21^stCentury Fox. Four days later it emerged that Fox would also be ceding its pre-existing 39% ownership to Comcast for $15 billion, giving full control of Sky to Comcast.

   A year of mega-deals

   This is the latest in a series of ‘mega deals’ over the last 12 months, where content distributors and creators are merging in an attempt to confront the existential threat posed by the rapidly growing streaming companies such as Netflix, and the tech giants who are ‘scope creeping’ into TV; in June, AT&T acquired Time Warner for $85 billion, and the following month Disney beat Comcast to buy 21^stCentury Fox for $71 billion. In an industry quirk, it was then Comcast who effectively beat Disney, as 21^stCentury Fox’s new owners, to the purchase of Sky; Sky was originally going to be part of the deal that sold 21^stCentury Fox to Disney.

   A global footprint and more original content for Comcast

   Comcast’s purchase of Sky will be a major boost to their global footprint: Sky has 23 million subscribers in the UK, Ireland, Germany, Austria and Italy, and has launched an over-the-top service in Spain and Switzerland, meaning Comcast will be better equipped to fend off the likes of Netflix and other tech giants. The acquisition also bolsters Comcast’s original content capabilities: Ovum’s chief entertainment analyst, Ed Barton, said ‘they could look at licensing content on a combined basis, which would lower the cost on a per-subscriber basis, if you have something you can show to a European and US audience.’ This merging of content would also mean a larger library to leverage as they roll out into other markets globally.

   Combining technical know-how

   The cultural affinity between Sky and Comcast could also be important for advertisers; it is likely, even inevitable, that they will combine their technical and data assets to forge ahead with an addressable advertising offering which will make TV as targeted as online.

   Instagram founders announce their resignation

   The other big news for the media and tech industries this week was the departure of Instagram’s co-founders from the company, which they announced on Tuesday and which sent Facebook’s share price tumbling. Kevin Systrom and Mike Krieger founded Instagram in 2010, before selling it two years later to Facebook for $1 billion – an almost unprecedented amount for a two-year-old start-up. It has since become the jewel in Facebook’s crown and its fastest growing revenue generator.

   A snub to Zuckerberg?

   Sysrom and Krieger said that they were leaving the company to explore their ‘curiosity and creativity again’.  That is being seen by many as a veiled snub to Facebook and its founder Mark Zuckerberg, who have made a raft of unpopular changes to Instagram, in many cases in an attempt to boost traffic to the core Facebook platform. Sysrom and Krieger wouldn’t be the only ones to leave following differences with the Facebook CEO – last year, WhatsApp founder Jan Joum quit over privacy disagreements with his bosses, who were keen to monetise the service.

   Monetising the jewel in Facebook’s crown

   As discussed at length in the press and in previous ECI Thinks posts, Facebook has in recent years been battered by criticism of its approach to data privacy, fake news allegations and for allowing foreign interference into national election campaigns – and its user base is showing signs of disengagement as a result. Instagram has largely escaped these problems: it has more than a billion active monthly users and successful updates such as its stories feature, messaging and IGTV have seen off competitors from the likes of Snapchat. In this context, it’s unsurprising that Zuckerberg and his team are so keen to squeeze as many ad dollars as possible out of Instagram; Lynette Luna, a principal analyst at GlobalData, said “Facebook’s strategy has been to allow companies it has purchased to operate independently to garner growth, and then monetise. When they start monetising that’s when there’s a little conflict with the founders.” Systrom and Krieger may well have wanted to retain the independence to run Instagram as they wanted.

   It is not yet known who will replace Systrom and Krieger, but it will be interesting to see if changes to Instagram, particularly to its revenue model and integration with Facebook, accelerate in the wake of their departure

   Thumbnail image: Shutterstock

9. The march of the tech titans on live sport

   August 21, 2018 14:14 Comments Off on The march of the tech titans on live sport

   Facebook, Amazon, Google, Twitter and others are leveraging the power of live sports to help them grow.

   People are watching sport online

   The FIFA World Cup earlier this summer and other major sporting events have confirmed what everyone has long suspected: that an increasing number of fans are streaming matches online instead of watching them the more traditional way, on television. This is very good news for tech companies such as Amazon, Twitter, Google and Facebook who are looking to leverage the passion of live sport viewers and its appointment-to-view nature as a way of reaching new users and increasing ROI on existing ones.

   Facebook has been looking for ways to super charge its growth

   Facebook in particular has upped its live sports game, aggressively pursuing the rights to air football and other sports across the world. At the end of June, the social network announced disappointing results for the second quarter: this was in part down to issues surrounding GDPR in Europe and the Cambridge Analytica scandal, but also, ironically, due to Facebook’s huge success – it has reached near-saturation point in mature markets in North America and Europe. Its future growth strategy therefore relies on two things: increasing revenue on each existing user in these mature markets, and attracting more users in countries where Facebook is less ubiquitous, particularly Asia and Latin America.

   The answer: live football

   The latter part of the strategy is already well underway, with live sports playing a key role – this was evident when they hired Eurosports CEO Peter Hutton to lead the push. Last week, it was announced that La Liga had signed an exclusive three-year deal with Facebook to live stream all its 380 matches for free to Facebook users in India, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Bhutan, Nepal and the Maldives. The platform has 348 million users across these markets, with 270 million of those in India. India is a key growth market for Facebook: it already has the largest Facebook user base in the world (270 million versus the US’s 210 million) but, with a population of around 1.3 billion and a projected 500 million internet users by the end of this year, there is huge room for growth for Facebook. Increasing smartphone penetration, relatively affordable mobile data and a passionate football fanbase means that the La Liga deal is a smart move from the platform. This move is in addition to Facebook’s plans to roll out its video platform, Watch, into India – it’s currently only available in the US.

   La Liga isn’t Facebook’s only move into live football streaming: just a few days after the La Liga announcement, UEFA confirmed that Facebook had bought the media rights for certain Champions League live matches in Spanish-speaking Latin America for the

   2018-2021 cycle. The matches they have the rights to include the final and Super Cup games, and the number of top international players involved in the tournament means that it is a huge deal across the continent.

   Other tech companies are also snapping up live sports rights

   Facebook’s activities in the live sports space are matched by its competitors’: Amazon in particular has been signing deals to attract more customers to its Prime platform, including a five-year deal for the exclusive broadcast rights of the US Open tennis tournament in the UK, the rights to screen 20 Premier League football games each season, also in the UK, from 2019 to 2022 and streaming rights for Thursday night NFL games in the US. Meanwhile, Twitter works closely with the NBA, partnering with them to help people keep up with the latest news and developments and watch the games, no matter where they are. YouTube has the rights to Major League Soccer games, including the Seattle Sounders and Los Angeles FC, for which it has both streaming and broadcast rights.

   The future of live sport and entertainment looks dramatically different

   There are concerns amongst consumers, particularly in India, that slow broadband speeds will affect their enjoyment of games, and that it will take something away from the camaraderie of watching games as a group on television. This is perhaps mitigated somewhat by the fact that the games will be free to view. From an industry perspective the arrival of tech platforms on the live sports scene is a seismic shift. For advertisers, concern about TV live sports strategies being adversely affected will surely be offset by the huge opportunities presented by delivering targeted ads to passionate sports fans in real-time. For the major players in broadcasting space, it is the fear of the existential threat that this precise situation causes that has led them to rethink and overhaul how they operate; this has led to some of the huge mergers we have seen recently, including the AT&T takeover of Time Warner and Disney’s deal to purchase 21st century Fox’s film and television assets, which was recently approved by shareholders.

   There can be no denying that the media and technology industries are converging at breath-taking speed, and that the landscape will look very different, very soon. Agility and a willingness to innovate and take calculated risks will be the ways to succeed as this transformation takes place.

   Thumbnail image: Shutterstock.com

10. What’s Facebook’s problem?

    August 2, 2018 15:03 Comments Off on What’s Facebook’s problem?

    For years, Facebook has been the darling of the tech and media worlds. Is the inevitable conclusion of its latest quarterly report that its star is fading?

    The unstoppable rise of Facebook – until now

    For many years, Facebook seemed unstoppable, unbeatable. Since its beginnings in Mark Zuckerberg’s dorm room in Harvard University, it has grown into a technology behemoth with 1.47 billion daily active users and 2.23 billion monthly active users. Facebook has very efficiently monetised these users’ data, with advertisers flocking to Facebook and contributing to a company value of over $500 billion, and to Zuckerberg’s personal fortune of around $70 billion. But it is Facebook’s handling of its users’ data that seems to be at the root of its recent reversal in fortune.

    What went wrong?

    Facebook’s sheen started dimming two years ago, when it was first implicated in fake news and political meddling. This didn’t seem to have any impact financially until its second quarter 2018 report last week, which made for painful reading for its investors. The report disclosed that the number of users in Europe dropped by 3 million, ending its nine-year streak of quarter-on-quarter growth in numbers of European users (note that this was for Facebook only, and not its other owned properties such as Instagram, WhatsApp and Oculus), and user growth in North America flattened. It gained just 22 million users worldwide in quarter 2 (largely in Asia), less than half of the quarter 1 figure. Worse, in the eyes of investors, was that it missed revenue forecasts for the quarter, bringing in $13.2 billion versus the $13.4 billion that analysts had projected. All this led to $120 billion being drained from Facebook’s value and a 20% decrease in stock price in after-hours trading on Wall Street, as investors were spooked further by Facebook’s predictions that its revenue growth would continue to decelerate.

    Scandals, data, addiction and saturation

    With the problems that have beset Facebook over the last few years, it was perhaps inevitable that this point would come. The first and perhaps most serious headaches for its leadership have been the twin issues of political interference – notably in the US presidential election and the UK’s Brexit referendum – and fake news. This culminated in the Cambridge Analytica scandal of earlier this year. Facebook was fined $656,000 – the maximum possible – for breaching UK data protection act, but has had to spend much more to offset the negative press. It exacerbated Facebook’s increasingly toxic reputation as a company that interferes in and affects society and politics, and it is likely that many users deleted their accounts in disgust, particularly in the UK where Cambridge Analytica was based.

    Another challenge for Facebook this year has been the implementation of GDPR in the EU, which set guidelines for the collection and processing of the personal information of individuals within the European Union. It is believed that GDPR was directly responsible for the loss of 1 million of Facebook’s monthly active users in the EU, with many possibly choosing to opt out instead of confirming assent to Facebook’s new data collection practices.

    Facebook, as with all media largely consumed via mobile phones, has of course been affected by the growing concern among consumers of the effect that spending a lot of time on smartphones and social media is having on their mental health and concentration. Across the world people are choosing to cut down on the amount of time they spend on their phones.

    Scandals, data protection and switching off aside, it may be that saturation is Facebook’s most serious long-term issue. Of the 3.5 billion internet users globally, 2.5 billion use at least on Facebook app, which means that user growth in many places, especially in mature markets, has naturally stagnated – there simply aren’t many people who don’t use Facebook, at least occasionally. This means that the business model must focus on increasing revenue per user, which Facebook has struggled with – newer initiatives such as Stories (Facebook’s answer to Snapchat) have proven difficult to monetise compared to the Newsfeed. And compared to Google’s parent company Alphabet, Facebook appears to be over-reliant on ad revenue: $13 billion – over 98% of its overall second quarter revenue of $13.2 billion – was from advertising, compared to 86% of Alphabet’s. This is thanks to Alphabet’s more diversified product offering, which includes hardware, the Google Play Store and Cloud services that are non-ad revenue. This discrepancy could be part of the reason that Google appears more resilient than Facebook, despite the fact that its record isn’t squeaky clean either.

    All is not as gloomy as it seems

    Despite the recent doom and gloom around Facebook’s latest financial reporting, the future isn’t too bleak for the social network. While the financial and user growth figures didn’t meet investors’ expectations, they’re still extremely healthy, particularly considering the storms that it has had to weather. The furore around its Q2 report is rooted in the fact that its growth has slowed, rather than in any actual crisis. Facebook has announced that it is investing billions into safety and security initiatives; these will future-proof the company but do eat into profit margins in the shorter term. Perhaps Facebook’s real problem is that it has been the subject of – and purveyor of – too much optimism and exuberance in recent years: it’s now time for it to settle down and accept its responsibilities as one of the world’s major technology companies.

    Thumbnail image: Wachiwit/Shutterstock.com