What marketers should know about Facebook’s upcoming pivot

Facebook unveiled a bold new redesign of the main Facebook app (the “Big Blue app”) at its F8 developers’ conference two weeks ago that elevates Groups and Events into central focus and mostly relegates News Feed updates. This redesign is a component of a larger strategy that Mark Zuckerberg outlined in March: Facebook is to no longer serve as a public square and will rather better facilitate private communications. The subtext here is that, with 1.5BN Daily Active Users, Facebook has already connected the world — now it must safeguard the fidelity of those connections and prevent them from being violated by sinister forces.

Everyone who is paying attention knows exactly what those sinister forces are: unscrupulous marketing analytics companies, state actors, fringe social movements and conspiracy theorists, for-profit Sowers of Political Discord, etc. These entities exist and should be dealt with, but the hysteria from the media that surrounds the discovery of each one is, ironically, designed to do the same thing that critics malign Facebook for: stealing attention with clickbait.

And with each new revelation of a privacy breach or an abuse by a malicious actor, an OpEd is penned that explores, from the most abstract altitude, Facebook’s impact on “small-d democracy” and its utility to society. Most commentary of Facebook as a social force is puerile sermonizing that wouldn’t be out of place at a dorm room bong session. And, surprise, very few people want to take the difficult position: Facebook is the most powerful advertising platform that has ever existed, and it has unlocked an untold amount of value for advertisers.

The most recent and highest-profile variant of this OpEd is the one written by Chris Hughes, a Facebook co-founder, in the New York Times last week. In the piece, Hughes argues that Facebook has become a monopoly and should be broken up by the government. Hughes proposes that the company has too wide a reach, Zuckerberg has too much concentrated power, and its colossal size has allowed it to stifle innovation, which, he asserts, should be another standard for classifying a monopoly (versus merely manipulating consumer prices).

The article is accompanied by a — frankly, puzzling — infographic:

There are two glaring issues with this infographic. The first is that the userbase across each of Facebook’s portfolio apps isn’t exclusive to those apps: this infographic appears to claim that 2.3BN users log into Facebook each month and 1.6BN different users log into WhatsApp each month, but that simply isn’t true, as there is a tremendous amount of overlap across these services. Facebook’s overall MAU size is not the sum of the MAUs of each of these apps. If I log into the Facebook app and then into WhatsApp and subsequently into Instagram, I’m just one person to Facebook, not three.

The second issue with this infographic is conceptually similar: a Facebook user doesn’t sign away their right to browse Reddit or to watch videos on YouTube or to record karaoke videos on TikTok when they sign up to the service — there’s overlap across services, too. These products are all freemium services with zero switching costs that can co-exist: it’s bizarre to look at the size of Facebook’s portfolio in terms of user base and say it is crowding out other participants when those other participants are perfectly capable of also capturing the attention of Facebook users.

It’s also impossible to make the argument that Facebook has crowded out new entrants to the market. Take YOLO, the anonymous question-asking app that rocketed to the #1 Downloaded chart position last week and was built on top of Snapchat’s Snap Kit platform. Facebook acquired an app with a similar launch trajectory, tbh, in 2017 and shuttered it a year later. tbh — or Instagram, or WhatsApp — didn’t have to sell at all and certainly not to Facebook: it did so because Facebook’s patronage offered it the best opportunity for success. That’s true because Facebook has managed to institutionalize the practice of not only capturing growth but of also capturing attention and value via its expansive, sophisticated advertising platform. That’s not true of some other potential acquirers and it’s why Facebook wins those deals.

There is real substance to that last point: if Facebook is broken apart or otherwise heavy-handedly regulated, much of the that value evaporates. Your Casper mattress, your Criquet shirt, your Atoms shoes become more expensive or disappear altogether because advertising as a whole has gotten much less efficient. OpEds about Facebook’s role in society don’t discuss this; they don’t recognize the value that Facebook has delivered to consumers and to advertisers by building the world’s most efficient advertising platform. This is the massive elephant in the room that frustrates marketers when they read these OpEds.

Especially when those OpEds claim that Facebook is no longer innovative, which is either disingenuous or out of touch. Facebook generates almost all of its revenue from advertising; advertising features play a central role in the user experience and therefore are user features. And Facebook has certainly brought to market profound advertising innovations in recent years: Lookalike Audiences (which is probably the most impactful innovation in digital advertising since the tracking pixel, although it technically falls outside of the five-year time window), the App Event Optimization bid strategy, the Value Optimization bid strategy, dynamic Campaign Budget Optimization, automatic captioning of video ads, pre- and mid-roll ads for videos, the dynamic creative generator, Instagram’s Checkout feature, and automated ads (which was launched just last week).

Without AEO and VO bid strategies, I’m convinced that the entire D2C category would not exist, and the dynamic creative generator allowed mobile commerce to flourish. But even beyond my subjective opinion on this topic, it’d simply be impossible for Facebook to grow ARPU in Western markets while user growth stalled unless — as it has — it was consistently delivering value to advertisers through ad product innovation.

This dimension is wholly absent from the discourse around Facebook and democracy, and it’s exasperating both because it should be the very heart of the argument (rather than the ridiculous and facile notion that Facebook “sells data”) and because actual marketers have more or less been excluded from the debate. Everyone wins when Facebook introduces new advertising features: users (who get better-targeted ads), advertisers (who get to sell products more efficiently), Facebook, and competitors, who get to borrow those ideas, like Snap did when it recently announced the Snapchat Audience Network.

It’s clear that Facebook is desperately working to stave off repressive regulation or something even more drastic, like the dismantling of the company. And Facebook should make overtures to governments, accept fines like the one it will imminently pay to the FTC with humility, and generally attempt to dull the knives that have cynically been unsheathed for it by politicians looking to score populist points. One development that has proceeded without much fanfare is Facebook’s cryptocurrency project, which I believe might not be designed with payments at its core but rather as a sort of “cash back” or rewards program for users.

Imagine users being rewarded for allowing advertisers to target them: it’d enable users to monetize their data while also ensuring that ads stay relevant. Facebook has been incredibly guarded in its discussion of this cryptocurrency project, and it may not end up being in service of advertising at all. But such a mechanism would certainly change the dynamics of Facebook advertising and incentivize users to make their data available for targeting — and potentially placate calls for extreme regulation or the company’s break-up in the process.

In any case, marketers should closely follow Facebook’s pivot from the digital public square to a secure messaging platform. As this transformation happens, much of the infrastructure that marketers rely on will likely change, with custom audiences and lookalike audiences appearing especially vulnerable to new constraints. And maybe that’s a good thing: perhaps if most users knew how custom audiences worked, they’d feel invaded. But the discussion as it exists now doesn’t examine that; it only promotes soaring language and sweeping philosophical pontification. And marketers need to prepare for the world that such language seeks to deliver.

Photo by Adi Ulici on Unsplash