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Facebook’s Dominance On Online Ad Spending Might Be Coming to an End

Facebook quite quickly managed to position itself as a dominant player in the world of advertising. For a few years in the past decade, you would have been quite hard pressed to find online ad real estate that was as valuable as Facebook. This was further influenced by the acquisition of Instagram which became a way for Facebook to prop up its flagging relevance and make itself a profitable enterprise regardless of the fact that it was not exactly the social media platform of choice for the vast majority of users and the like.

With all of that having been said and now out of the way, it is important to note that recent data indicates that the era of Facebook’s dominance might just be drawing to a close. While there hasn’t been anything dramatic to speak of so far, both Facebook as well as Instagram have seen a concerning drop of around 5-10% in ad spends from clients, something that indicates that things might not go quite so well for the company in the future.

Now, it is essential to note here that Facebook is not exactly in dire straits yet. The company has continued to see growth in its revenue, with a second quarter revenue of $29.1 billion representing a healthy 56% increase year on year. The pandemic, which hit a lot of industries really hard, saw Facebook seeing healthy revenue growth as well, with stay at home laws making it so that users were using the social media platform a great deal more than might have been the case otherwise.

What’s more is that there are certain marketing agencies out there that are increasing their ad spends on Facebook as well, but this also comes with significant ad spend increases for other platforms such as TikTok and Pinterest. Hence, while Facebook is still growing, its growth is starting to stall, and this is a warning sign for any corporation as it indicates that things are going to stop going their way quite soon.

There is a combination of factors that is causing decreased ad spends on Facebook. For one thing, Facebook does not have the same kind of relevance with a younger demographic that it used to have. Brands focusing on Gen Z demographics would probably diversify their spends, and the rise of competitors like TikTok which has seen massive adoption rates among younger consumers certainly doesn’t make things any better for Facebook. What’s more is that CPM is increasing, with a 12% year on year increase bringing CPM up to $6.37 from $5.71.

There is also the small matter of Apple’s new privacy policy which makes it really difficult for Facebook to get the tracking information that it needs from its users without letting them know that they are being tracked. A lot of brands are feeling uncomfortable with Facebook on a personal level as well, as can be seen in last year’s advertiser boycott.

What all of this means is that Facebook is slowly drifting into a hole that it might not be able to escape from unless it makes serious changes that would help it win the trust of the public back again.

Photo: Elijah Nouvelage / Reuters

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