WSJ – What’s Next for Facebook’s Ad Model?

From CMO Today:

Here are some thoughts I shared with Lara at WSJ:

Now that we’ve had time to digest Mark Zuckerberg’s trip to Capitol Hill, how are advertisers reacting as the Cambridge Analytica scandal continues to unravel? We heard last month that a handful of brands suspended advertising on Facebook. Ad Age reported 20th Century Fox also canceled a planned Facebook Messenger Chatbot launch for its “Deadpool” brand, fearing users may be concerned about the data they were sharing in light of recent headlines. Despite the smattering of small holdouts, overall, advertisers aren’t pulling back. Data from media planning and buying platform 4C suggests ad spend on Facebook increased 7.2% week-on-week from March 17 (when the Guardian’s first Cambridge Analytica article dropped) to March 23. Facebook ad spend from March 24 to March 30 rose 14.5% week-on-week. “As long as ROI (return on investment) is there, advertisers won’t stop investing in Facebook altogether,” 4C Chief Marketing Officer Aaron Goldman said. Indeed, Facebook Vice President of Global Marketing Solutions Carolyn Everson said Thursday at The Wall Street Journal CEO Council in London, “We are not anticipating major changes to our overall revenue and business model.”

—Open Heart Surgery—

But might the Cambridge Analytica fallout cause Facebook ad revenue pain in the long term? Dean Crutchfield, a New York-based independent branding consultant, likened the Capitol Hill hearings to “open heart surgery:” While the patient (Facebook) will be closed up and there might not be an immediate impact on its business, there will still be a scar, which eventually could find its form in regulation or a dent in perception of the company among consumers. One of the biggest issues for the advertising community is that the data-driven business model of digital advertising has become a dinner-table conversation and some consumers are now actively checking and reducing the amount of data they share, Mr. Crutchfield said. (Ms. Everson said Thursday that users largely haven’t changed their privacy settings in the past four weeks.) One senior ad buyer, speaking to CMO Today’s Alex Bruell, said questions still remain around whether lawmakers pass restrictive regulations on tech companies, “If indeed the U.S. adopts a Euro-like law, that’s bad news for advertisers with limited information about their own customers. No more shortcuts via third-party data. Advertisers who have invested a lot in CRM (customer-relationship management) efforts will fare best.”

Author: Dean Crutchfield

Builds Brands and Fixes Them When Broken