In the immediate aftermath of the Cambridge Analytica fiasco and speculation that the data it collected may have influenced the 2016 presidential election, the public’s trust in Facebook plummeted. To be more precise, from 2015 to 2017, those who would agree that Facebook is committed to protect the privacy of its users hovered around 80%. Following the scandal, that rate fell to nearly 25%.1
The scandal, while important in its own right, may have camouflaged another Facebook challenge: ads on the platform have been increasing dramatically. Facebook’s CPMs (cost per thousand impressions) surged by 122% this past January, year over year.2 In February, CPM costs increased by 77% year-over-year.3 This marked the two largest year-over-year jumps in ad prices for Facebook over the past 14 months.4
If you work in digital advertising, you must follow both the cost and public trust trends closely. If that trust in Facebook stagnates, new user growth and usage remain flat or even decline, and CPMs continue their upward climb - a scenario that doesn’t seem so far-fetched - you may need to reconsider where you put your ad dollars. In fact, it looks like some advertisers already have started to draw a question mark next to Facebook’s name.
As a result of price increases alone, several direct-to-consumer (D2C) brands are cutting their Facebook ad spend as they look to reduce their dependency on the platform.5 Digiday interviewed 10 D2C brands that recently have moved their Ad spend away from Facebook and toward TV, radio and print. In one such interview, Fabian Seelbach, the SVP of Marketing for Curology, a company that sells acne treatments, comments on why their brand is electing to diversify its ad spend, ‘The effectiveness for Facebook has gone down and got particularly bad in late April and early May, which is why we are shifting significant spend.”6 Brooklinen, a luxury bedding company and D2C brand, spends up to 75% of their ad budget with Facebook. Their founder, Rich Fulop, now says “We’re trying to move away from Facebook as fast as we can.”7
Fulop explained that CPMs on Facebook have doubled in a year. “We’re fighting in this little slip of real estate with everyone else out there and it’s hard to cut through. You’re paying an impression-based auction, so you are essentially bidding against anybody and everybody that wants to compete for that space, so it’s become a hyper-competitive environment.”7 MVMT, a D2C seller of watches, is dedicating 30% of this year’s ad spend to TV, direct mail, podcasts and radio.5 This trend certainly is a product of rising ad costs, but don’t discount the impact of declining confidence in Facebook as another possible reason why some advertisers are hesitating to put more money into the platform.
Are these D2C brands on the leading edge of an emerging trend of moving ad dollars away from Facebook? Or will advertisers continue to pay, despite the higher costs and the data and privacy drama? As Facebook changes its policies and prices, each brand will have to make a fundamental decision as to how they’d like to address their Facebook ad spend.
When looking to the future, both advertisers and agencies will need to closely observe more than just Facebook’s CPMs and CPAs. They also need to keep tabs on the platform’s public perception. Finally, they need to have a plan to place their media dollars in ways that will perform, but without the risks Facebook and perhaps others now present.
For all the naysayers who believe the large and scalable traditional media outlet, TV, is a thing of the past, you may be in for a surprise.
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