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Facebook does a MySpace

Facebook's declining brand has opened the door for a new advertising giant: Amazon.

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Hubris has led Google and Facebook to distort their brand values and lose consumer trust.

Google and Facebook, the digital advertising duopoly of recent years, are under pressure: both companies are expected to see their share of digital ad spend (the cash cow that they are both utterly dependent on) continue to fall between now and 2020.

 

Who would have thought that all it took to turn brand love into hate was an (albeit relentless) focus on profit? After all, if consumers didn’t want to be ruthlessly exploited for their data, they surely shouldn’t have sponsored the digital advertising boom by clicking on those lovely little links! Mind-boggling…

 

Yes, somehow Facebook has contrived to come across as even more profit-focused than Amazon – with moderator-PTSD pipping warehouse-carpal-tunnel-syndrome in the ‘OK, let’s be evil’ stakes.

 

Still – let’s look on the bright side, this opens up a slot for other digital marketing platforms to leverage consumers’ hard-earned data for the same consumers’ hard-earned cash. It’s definitely a long-term play.

Facebook’s advertising-smash-and-grab approach has similarities to the decision-making that led to the fall of MySpace.

News Corp purchased MySpace for $580 million in 2005 and almost immediately pushed the self-destruct button. Whilst seeking to monetise the service they ignored user experience and watched their enormous user base slowly float off to the competition…the (at the time) user-focused Facebook.

 

Facebook has gone on to become the 3rd most visited site in the world, but recently there have been alarm bells ringing at No. 1 Hacker Way. Whilst Mark Zuckerberg is not quite pulling the plug on his ocean of 2bn+ active monthly users in quite the same way as MySpace, similar strategic choices are being made and there are a few cracks starting to show.

 

It’s not exactly breaking news but Facebook hasn’t had the best 2018. Usage dropped 5% across all demographics this year in the US, their lowest since 2015. In July, Facebook recorded the largest ever single day loss in market price,with a staggering $120bn value plunge. The Zuck’s personal net worth simultaneously dropped by $15bn to a mere $67bn that day…even with that amount of cash still in the bank, that’s got to hurt.

It is impossible to curate the volume of content published these days, and Facebook resorted to a pay-to-win policy.

If you’re a marketer, you’ll have noticed your organic reach take a nose-dive off the edge of a cliff in 2018 (…it had only been hurtling downhill towards it before that). In January 2018, perhaps after a visit from the ghost of MySpace past, Facebook's Head of News Feed, Adam Mosseri, announced another algorithm shift “to make News Feed more about connecting with people and less about consuming media in isolation”. Marketers have become victims of their own success on Facebook. There's simply too much content being published, making visibility in the News Feed increasingly competitive. As an overly congested platform, Facebook concluded that its only option was to show content with the highest price…sorry…relevance.

 

Bad news for creators and brands who have spent countless years curating content and building an audience, only to have those hard-earned eyes and ears sold off to the competition. Increasingly poor organic reach is causing brands to turn their efforts to pay-to-win channels.

The push for profit at Facebook led to the adoption of ethically-compromised consumer data policies.

Even if you don’t know or care about organic reach, there’s no escaping Facebook’s political and privacy problems in the news headlines. December 2018 marked the third anniversary of the first reports of Cambridge Analytica’s illicit harvesting of personal data from Facebook. The company is accused of using data from millions of people’s Facebook accounts without their consent, for political influence in the US elections and the UK’s EU referendum (at least).

 

The scandal was significant enough to incite a public outcry on social media and digital media ethics – with the fallout affecting all social media companies and prompting calls for increased consumer protection and online privacy regulations.

 

In November 2018 a cache of Facebook documents were seizedby UK MPs and revealed a stark admission from one of Zuckerberg’s internal emails “What's good for the world isn't necessarily what's good for Facebook.” His cavalier obsession with growth has led to a disregard for user safety, privacy and experience, promoting brands and celebrities from Tesla to Will Ferrell to close their Facebook accounts and begs the question when will the hangover from this scandal ever end?

Social media is not renowned for longevity and, as Facebook reached saturation point, it resorted to dubious gamification techniques to stimulate growth.

I feel tremendous guilt. The short-term, dopamine-driven feedback loopsthat we have created are destroying how society works.

Chamath Palihapitiya

Facebook has been the social media top dog forover a decade, becoming an indispensable extension of the western world’s social life in the process. Saturation point has been reached (in terms of both market share and intensity of use) in most major and many emerging markets…and Facebook need to find new ways of keeping us scrolling.

 

To a degree, social networks have always exploited how our brains work to keep us hooked (and clicking on adverts), but it’s become so extreme and so explicit now that Joe Public is becoming increasingly aware of its negative effects. In another blog, my colleague Mark Shannon discusses how this is resulting in a loneliness epidemic, and (spoiler alert) Facebook is one of the most sophisticated brain-hackers in the world.

As Facebook's advertising begins to sunset, it’s a bright dawn for Amazon.

With all of the issues above contributing to a massive brand devaluation for Facebook (and in a similar way, Google), but with global adspend set to rise 4.6% in 2019, who’s cashing in on the extra digital dollars if Facebook and Google are losing their share? At least one of the correct answers is Amazon. The retail giant was projected to bring in nearly $3 billion in digital advertising in 2018 from the US alone (a 64% increase over 2017) and is on track to more than triple that in the next couple of years.

 

Just as Google’s dominance in content search led it to market leadership in digital advertising in the last decade, Amazon’s dominance in product search is driving its own growth into an advertising powerhouse. There are more than 5 million sellers on the platform all competing for space, and the ability to buy keywords related to their products to reach users as they are searching on the platform is compelling. And Amazon’s on going R&D in technologies like AMG and AAP are making it ever easier for advertisers to spend.  However – it will be interesting to see if Amazon can grow its advertising base quick enough to avoid the ‘platform saturation’ that has affected many of the content platforms.

 

Another contender for the ad throne is Snap. The social media company is forecast to grow its U.S. digital ad revenue by 82% to more than $1billion, increasing its share to 1% of the market. So it looks like Kylie Jenner didn’t sink the company with one tweet after all.

 

Sadly for Twitter Inc. their ad revenue was projected to decline for the second consecutive year in 2018. However, the downward trend is expected to be just a blip with a positive 2019 forecasted. Brands are able to avail of much better organic reach on Twitter, than Facebook for example, which could boost its popularity.

Facebook are not done yet but are at a critical juncture of their evolution – having to strike a balance between the interests of its customers and its consumers.

So, everyone’s favourite cuddly underdog (not a phrase used too often about Jeff Bezos and Amazon) is growing strongly, and we’ve painted a picture of doom and gloom for Facebook and Google. However, it is important to note that Google and Facebook’s ad revenues are still growing, despite a decrease in market share. These two giants still rake in over 50% of digital ad revenue in the US, and even more in the UK. And don’t forget about Instagram either, they contributed $21bn worth of ad dollars to Facebook in 2018 – up 17% on last year with continuing growth expected.

 

So overall, Mark Zuckerberg and Facebook have a lot of lessons to learn from 2018, but they have the money to act on them. The only question is whether they can redefine their brand values in a way that allows them to build a sustainable and balanced business: getting back to adding value to people’s lives, rather than just adding profits to the pile.

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