The Real Cost of Advertising with Facebook
Photo by Dima Solomin on Unsplash
Facebook Crashes
On Monday, The Journal., Wall Street Journal's podcast, released an episode called "Facebook's $10 Billion Advertising Exodus." In the episode, Katie Linebaugh explored how Apple's change in default tracking resulted in Meta losing $10 billion in revenue.
Meta's recent stock crash may be counted as the worst in history as the giant took a plunge at the beginning of February. The loss brought to light Facebook's actual product – the end-user. Of course, those using the ad platform have known this to be the case for a long time. But for many, the free social channel utopia is now morphing into a dystopian reality.
Facebook's Revenue
For those unaware, 97% of Meta's revenue last year was generated from advertising, which relies directly on user data. At the same time, with Apple's new anti-tracking measures, now 80% of iPhone users have turned off tracking, leaving Meta in an uncomfortable business situation.
The new dynamic also affects those depending on Meta's advertising platform to expand their businesses. Linebaugh spoke with Martha Krueger, founder of Giften.com, who long relied on Facebook advertising to find new customers. However, with the recent changes made by Apple, Facebook's ad platform has been performing far less efficiently. These unique circumstances ultimately forced Krueger to seek different avenues of finding new customers.
Krueger acknowledged that the change had a positive outcome as she diversified her advertising strategy. Putting all your eggs in one basket is dangerous because you end up with a mess if the basket falls. Similarly, relying on a single stream for new customers takes on a higher risk because if that stream dries up, what are you left with?
2 Cautionary Tales
This story serves as a cautionary tale in 2 regards. First, developing a marketing strategy that is well-diversified and ready for inevitable changes is best practice when it comes to running a solid business.
Second, and maybe more important, should Meta's practice of utilizing user data ever have been tolerated in the first place? Though I feel for the small business Krueger was running, is it possible that she was growing her business on inappropriate advertising practices by using Meta's platform? And is it possible that the changes provided by Apple actually rectified the problematic relationship that small businesses had with their customers? Or, another way of saying it: was Krueger growing her business based on a false reality that Apple finally corrected?
Note that Apple did not stop tracking. Instead, they gave the choice to the user by offering prompts. So in some ways, Meta's expansive growth wouldn't have been sustainable if they had stopped to ask users if it was okay. This business practice appears highly deceptive and seems to have created a bubble that has now burst.
Would We Participate if We Knew?
It leaves us with the question of whether advertisers are taking advantage of people's data through 3rd party vendors. As someone in the marketing field, I wrestle with this common ethical question. Could it be that Krueger, unknowingly, was participating in sketchy practices that were obscured by this giant ad platform named Meta? If Krueger was closer to the actual data harvesting practices, or worse, had to harvest them herself, would she have still built her business to rely on that specific practice?
I cannot speak about Krueger specifically, but I wonder how often we are willing to participate in potentially unethical behavior because it is through an official and highly accomplished platform that hides the nitty-gritty details. What are other successful marketing platforms partaking in practices that wouldn't hold up if they were to stop and ask their user base if they were okay?
When Using or Building Products
This story serves as a reminder to stop and ask how the platform works, whether it is advertising or another platform. Similarly, when creating a digital product, the creators must stop to reflect on whether they are avoiding asking users a specific question because they will not like the answer.
