The Facebook-Google duopoly has a stranglehold over internet advertising. While the search engine dominates the pairing, Mark Zuckerberg’s creation is no slouch – last year, more than a fifth (21.8 per cent) of all US digital ad spending went to the social media network, equivalent to $28.2bn (£21.7bn).
But the company is in hot water, and its grip on the ad market may be slipping.
The latest obstacle arrived last week. Following an 18-month inquiry, the UK parliament’s Digital, Culture, Media, and Sport select committee released its final report into how dis-
information and fake news are being spread online, especially on Facebook.
The report warned that “malicious forces” are using the platform to undermine elections and democracy, and called for new regulations that would make tech companies like Facebook responsible for taking down harmful content.
It also called for more transparency around who pays for ads on social media, as well as the creation of a new code of ethics and an independent regulator to oversee tech giants.
That’s just in the UK. Facebook is also facing more questions from US politicians about whether users were misled regarding protection of their personal data, and is set to receive a multi-billion dollar fine from the Federal Trade Commission following an investigation into its privacy policies.
Meanwhile, a BuzzFeed report from January exposed how shady marketers are exploiting a loophole in Facebook’s rules by renting user accounts in order to post scam adverts for things like online casinos and male enhancement products.
Even when Facebook catches wind of the ads, shuts them down, and bans the account, the marketers can move on to another rented account and post them again.
Scrutiny of the company is mounting as we approach the first anniversary of the Cambridge Analytica data scandal in March. Slowly but surely, these incidents and headaches are coming together to undermine trust in the social media platform.
At what point will users – and advertisers – abandon it altogether?
Probably no time soon. In fact, Facebook’s most recent earnings report showed that average ad revenue per user was up 30 per cent. With all the problems of the last 12 months, why is Facebook still so dominant?
“Simply put, advertisers continue to go where the people and eyeballs are, ethics be damned,” explains Jessica Liu, senior analyst at Forrester.
“It is really hard for brands to ignore Facebook’s two billion plus users (inclusive of all of its family of apps), and it has richer targeting capabilities compared to other advertising channels.”
According to Liu, Facebook can still deliver better audience reach than any of its competition, despite waning trust. And even if the reach of Facebook itself were reduced, many users would continue to use WhatsApp and Instagram – both owned by the social media giant.
Other marketing experts are less certain. Ruben Schreurs, founder and chief executive of media consultancy Digital Decisions, claims that Facebook’s appeal to advertisers is in decline, especially as regulatory action reduces the value of its data.
“If Facebook doesn’t address this, the depth of its targeting and advertising options will also decrease heavily,” he warns.
“The key issue that Facebook must address is in proving value and effectiveness of advertising. Marketers generally struggle to measure and prove campaign effectiveness, and the fact that there’s no solution yet on the horizon is a cause for concern.”
Tom Roberts, chief executive of Tribal Worldwide London, agrees that Facebook has some work to do.
“The company appears to have forgotten about its users,” he says.
“Facebook can acquire new audiences with hard dollar, but it needs to win back the trust of the public. Regulation will go some way to achieving that – along with a better balance between commercialisation and user experience.”
However, he notes that, for the moment, marketers remain hooked on Facebook like it is “crack cocaine”.
Regardless of the impact of the parliamentary committee’s report, Facebook will attract marketers for as long as it can draw in a large audience of users.
“The power of the company is still with the people,” says Keith Reynolds, digital strategist at ad agency Boys + Girls. “Problematic content is just another speed bump, but it won’t derail the money train.
“We need to educate people on the importance of their data and how vulnerable they are online. Until then, Facebook will continue to be on every marketer’s plans.”
The tide is starting to turn for Facebook, albeit slowly. Competitors like Amazon will take away some of its ad market share, governments in the UK and abroad are cracking down, and scandals keep emerging.
But it is unlikely that any one incident or factor will be enough to knock the company down – it is simply too big, and too useful for marketers for them to abandon it.
If these issues keep stacking up with more frequency, perhaps the public will take more notice. And if consumers learn more about the value and importance of their personal data, they may start to reevaluate their relationship with Facebook and its assortment of apps – or even stop using it altogether.
This – a mass exodus of disillusioned users – is the only thing that can topple Facebook’s dominance.