Why Facebook May Actually Be Winning.

Over 2 billion active users visited Facebook each month in 2017.   Facebook connected those 2 billion users to 6 million advertisers and generated nearly $40 billion in advertising revenue for the company.  In turn, that marketing spend created something rare for CMO’s at brands and retailers – a real measurement of the return on their investment.

Facebook shares some of the details of their marketing platform’s performance as part of their sales efforts:

“American Eagle Outfitter’s campaign, which ran November 21, 2016–July 1, 2017, successfully boosted all key metrics, including:

• 4X higher return on ad spend compared to a regular lookalike audience based on people who had visited its website or used its app
• 2.5X increased return on ad spend (from Q4 2016 to Q2 2017)
• 14.5% increase in share of broad audience targeting revenue over total”

In their January earnings call, Sheryl Sandberg shared a small business success story. “Gym Shark is a fitness clothing brand based on the U. K. They ran Facebook video ads and Instagram story ads for their Black Friday campaign. And then they targeted with look-alikes people who had previously purchased, and Custom Audiences for people who started but didn’t complete the purchase. And they saw a 9.3x return of investment over the two week holiday period.”

These results are driven by our data, which we implicitly or explicitly allowed Facebook to gather, aggregate, combine with other sources, and then use to serve consumers what they are most likely to want to see.  The sales results validate that consumers (Facebook visitors) do want to see these products, and of course, that the retailers are thrilled to have the ability to target potential customers so precisely.

With Mark Zuckerberg sitting before Congress today because his company failed to prevent Cambridge Analytica from a) misrepresenting itself to users as a non-profit and b) gaining access to the data of the networks of the misled users, will retailers still come to Facebook to target their ads?

First, visitors need to keep coming to facebook, which, in spite of #deletefacebook, they are.

As for the retailers, they may increasingly say yes.  In fact, the gravity pulling them to Facebook may strengthen.  Any regulation (self-imposed or otherwise) will reduce (and has already reduced) what Facebook will share with app developers.  In effect, Facebook could become a hoarder of some of the most profitable data. Retailers won’t be able to go to other locations to get this treasure trove of psychographic, demographic, and just plain graphic data.  And so a company that seems to be on the ropes might actually be getting stronger.

By David Weiss