Why the advertising industry believes that Facebook is invincible
- Facebook's business is nearly 100% driven by advertising. And even with all the negativity swirling around the company, advertisers say they have no plans to pull budgets.
- That's because advertisers essentially have no alternative. Facebook is unparalleled in terms of scale and its ability to deliver targeted ads using data.
- That dynamic is in stark contrast to Google's YouTube, where some advertisers have stayed away ever since some ads ended up next to hate videos on YouTube.
- While marketers say they have other places to advertise next to video besides on YouTube, cutting Facebook ads would directly hurt their business.
When the Times of London published a story about big marketers' ads appearing next to extremist content on YouTube earlier this year, more than 250 brands pulled their spend from the Google video hub. Many industry executives jumped on the opportunity to admonish Google for not doing enough to keep brands safe, with brands such as Walmart and JPMorgan Chase publicly airing out their concerns.
Over six months later, it is Facebook, the other half of the advertising duopoly, that is embroiled in a public maelstrom. Just a week after Facebook's top lawyer testified before the Congress on Russia-linked ads, Facebook informed advertisers that the company had discovered two new measurement errors - the 11th and 12th such errors that the company has disclosed in a little over a year.
Yet, even with all the negativity swirling around Facebook (including articles questioning whether its actually good for society or not), its business remains unscathed. Not only did the company beat Wall Street's expectations for the third quarter and report its best earnings to date, it also continues to attract advertisers, and most seem unperturbed. And even the ones that are concerned are not changing where they allocate their ad budgets.
In essence, Facebook's business is nearly invincible.
"I wouldn't say they are foolproof, but they are fairly impervious to almost anything," Kyle Bunch, managing director of social at R/GA Austin, told Business Insider. "They have managed to build a remarkably effective advertising engine, and it is difficult for any marketer to cut that off from their marketing mix."
'You just can't shut Facebook off without doing any damage to your brand'
Over the years, Facebook has cemented its position as an effective marketing vehicle for advertisers. Its unparalleled scale and reach have been huge draws for marketers of all sizes. Thus, despite the mounting criticism the company faces in the public arena, advertisers have been pouring even more money into it than before.
It's not hard to see why. With its 2 billion users, Facebook has a huge audience for advertisers to mine. Add to that its targeting capabilities - many have argued that the very reason Russian ads and other problematic tags were possible in the first place was because Facebook is really good at hypertargeting - and it becomes hard to ignore.
"Facebook is a commanding platform," said a financial services marketing executive, who wished to remain anonymous. "You just can't shut it off without doing any damage to your brand."
That's because, for the most part, marketers have found Facebook ads highly effective in driving business results.
"Facebook is a great persuasion tool, period," an ad agency holding company executive, said on the condition of anonymity. "Whether you're trying to influence people to vote a certain way or you're selling a product, Facebook works at scale."
'We're not seeing our ads next to ISIS propaganda videos'
Advertisers feel that unlike the YouTube crisis, which directly put their brands' reputations at risk, Facebook's role in 2016's unexpected election outcome does not have a direct bearing on their business.
"With the Russia issue, it was something that was done with one entity that was deliberate in using Facebook and advertisers weren't directly involved," said Sherwin Su, director of social media activation at Essence. "The difference with YouTube was that brands weren't aware that their content was going to be put aside inappropriate content."
The financial services marketing executive agreed, saying that the marketers were not publicly connected to fake news and other other nefarious activities on Facebook.
"We're not seeing our ads next to ISIS propaganda videos," said the executive.
Plus, there are alternatives to YouTube, something that can't always be said about Facebook. "Google behaved like they had the same monopoly on video with YouTube, like they did on search." the executive said. "And they don't. You can put your videos in other places and not see deteriorating returns."
"After the election, I called a senior executive at Facebook and said that they had thrown the election," the ad insider told Business Insider. "The response was 'No way, we don't have that kind of influence.' It's clear now that they need to do better, but I have confidence they will get it right."
"We are all cracking the whip," the financial services marketing executive agreed. "It just may not be as public."
'There is no alternative'
Russia aside, Facebook has also been grappling with a slew of measurement errors, one after the other. While a number of advertisers interviewed by Business Insider voiced their concern over these errors, they said they hadn't been severe enough to change where they allocate their ad budgets.
"It is a concern when there have been misstatements or misrepresentations in measurement," said an entertainment marketing executive. "But it hasn't materially affected the way our campaigns have delivered on their metrics, at least not yet."
Some of the revelations made by Facebook include overestimating the average viewing time for video ads on its platform, the under counting or over counting of a number of metrics including weekly and monthly reach of marketers' posts, and most recently charging advertisers for video ads that played while out of view.
"The measurement metrics that are being goofed up are vanity metrics anyway," he said. "If their future compromises actually impact results and outcomes, then that's going to have implications for them from the brands' angles."
Marketers have also gotten accustomed to a certain level of dicey ad practices. "Even with the wrong math - it is really small compared to fraud rates on other platforms," said the ad holding company executive. "In digital advertising, you just learn to live with a certain amount of ambiguity."
The advertising industry is also pleased that Facebook has been more upfront about its mistakes while pledging to improve matters.
The platform has published a white paper on organized attempts to use Facebook to influence the election, for instance, and agreed to an audit by the Media Rating Council. It has hired thousands of content moderators to manually flag inappropriate posts and most recently, it has made disclosure necessary for all political advertisers and made advertising more transparent in general on its platform.
"They have been very transparent and proactive," said Shu. "They've been good partners and have outlined what they are doing to fix everything."
Ultimately, there is just no better alternative to Facebook - or at least to the duopoly - according to R/GA's Bunch.
"Most marketers are looking at the closed loop data - they know exactly how much Facebook is driving in terms of actual sales," he said. "Where are you going to make that up if you drop Facebook? Google? That's probably the only other alternative."