What Advertisers Can Learn From Facebook's Rough Quarter

By Dan Rocklin | @punkrocklin | Account Manager at Hanapin Marketing |

Facebook made headlines again last week, albeit not in a way that the tech company would have wanted to. On Thursday, July 23, Facebook posted the largest single day decline in stock price in the history of the US stock market, posting a market capitalization loss of ~$119 billion. This sharp loss was a response to a disappointing quarterly report, which showed that users in the US and Canada (their most profitable regions) had stayed static at ~185 million users. That marks the 4th straight quarter that Facebook failed to grow their US and Canadian active users, leading some analysts to wonder if the platform has plateaued. Additionally, many are drawing a link between outrage at Facebook’s handling of user data (as well as more general criticism related to the 2016 US elections). While its unclear how large a role those issues played in Facebook’s failure to grow, it seems likely that they were at least contributing factors.

So what does this recent decline mean for advertisers? With the necessary caveats that I have no crystal ball, nor access to an oracle, it seems very unlikely that Facebook will cease to be an advertising giant in the foreseeable future. Facebook optimists can take heart in the following:

  1. Even if Facebook’s user base has plateaued at ~185 million users in the US and Canada… that’s still 185 million users. To put that in perspective, Twitter has ~68 million active daily users in the US. While up-to-date statistics regarding Canadian active Twitter users are not readily available, even a generous estimate would have Twitter at less than half of Facebook’s user base.
  2. At risk of sounding like a Facebook public relations spin doctor, I think it’s possible to reframe the lack of growth positively. Consider: Facebook faced its most consistent and serious negative headlines of its history in Q2 2018 and managed to maintain its large user base. If you think that those negative headlines contributed to its lack of growth, and you think that the worst of those headlines have come and gone, then it’s not out of the question to predict greener pastures ahead.
  3. Facebook continues to be the most developed and featured social ad platform. Compared to its relatively nascent competitors, Facebook offers the best advertiser experience and the most options for targeting. Even if its relative user-base advantage dwindles, it still has a massive head-start on advertising tool sophistication.
  4. As other traditional outlets such as television and print media decline, those advertising dollars are following users to the digital spaces that increasingly occupy their time. This trend doesn’t look to slow anytime soon, and the resulting rising tide should lift all digital boats, Facebook included.

So, does that mean that Facebook advertisers have nothing to worry about, and that Facebook’s decline will have no impact on the social media giant as an advertising channel? Not necessarily. While Facebook is likely to retain its primacy as the social media advertising giant, we’re already seeing signs that the platform is responding to those privacy concerns in ways that impact advertisers.

One such change is the deprecation of partner categories, which are audience behaviors and characteristics that rely on third party data (if you’re interested in the effect of this change and how to adapt to it, be sure to check out our article on Facebook Shutting Down Partner Categories.) Facebook is also experimenting with giving users in some markets the ability to view a page’s advertisements, a move that could impact competitor research and an advertiser’s ability to test different messages on different audiences effectively.

More than any specific platform changes, though, I think the most important thing advertisers should learn from Facebook’s tough Q2 is that users are increasingly aware and critical of poor advertising and privacy practices. While Facebook has thus far absorbed the brunt of that ire, advertisers should put some serious thought into whether or not their practices on the platform would fare well under intense public scrutiny. Whether you work on behalf of a client or are part of an in-house team, think carefully about whether or not your advertising practices could spark outrage and alienate your audience. Specifically, you should ask yourself:

  • If you’re using customer match data, are you handling that data responsibly? And if you’re collecting customer data from lead form ads, are you following IT security best practices for protecting that data?
  • Are the ads you run forthright and truthful? Do they contain objectionable or offensive content?
  • Are you serving ads in a non-discriminatory manner? Even if your ads are approved by Facebook, it’s well-worth familiarizing yourself with how your industry is impacted by anti-discrimination law.
  • If you’re running ads on Facebook’s display network, are you excluding content that your brand would not want to be associated with or seen as supporting? If you’re not sure how to do that, learn How To Add A Facebook Ad Placement Block List!

So, is Facebook close to shuttering its digital doors or significantly changing its ad platform in the near future? Probably not. Still, advertisers would do well to take heed of its rough 2018, and think seriously about whether or not they are using the platform in ways that would withstand public scrutiny.

Questions? Feedback? Reach out on Twitter @ppchero!