Facebook’s Plan to Dominate Ad World
By: Steve Smith
Two weeks ago shares of Facebook (FB) took a hit when it revealed it overestimated the amount of time users were viewing video advertising and its algorithm was using a misleading metric. But after dropping some 4% on the day to a low of $125.40, shares have stabilized and inch back to the $128.50 level.
In the aftermath Facebook COO Sheryl Sandberg sat down with Adweek to discuss the future of advertising, especially digital and on mobile, and how Facebook plans to dominate.
In her opening remarks, “businesses need to catch up” to the trend that’s shifting traffic to mobile.
“Mobile is both a challenge and an opportunity for businesses, and especially for small businesses around the world,” she said. “From the largest brand to the smallest mom and pop shop, everyone knows that to reach people where they are, mobile is a big opportunity. But it’s hard.”
On Tuesday, Facebook announced it now has more than 4 million advertisers, with more than 70 percent coming from outside the U.S. Of those using the platform around the world, the fastest growing region is Southeast Asia, in countries such as Vietnam, Indonesia and the Philippines. European nations like Greece and Ukraine are also growing quickly.
Mobile also continues to be a focus, with more than 85 percent of business pages using mobile and 40 percent of active advertisers creating ads for mobile. (According to Facebook’s second-quarter earnings, 85 percent of the company’s $6.44 billion in ad revenue came from mobile devices.) However, a third of small businesses in the U.S. still don’t have any sort of internet presence.
Here are some of the highlights from the discussion:
The overall industry needs better ad metrics
Less than a week after Facebook made headlines for miscalculating video metrics for advertisers, the company downplayed the significance of the error, which persisted in some cases for as long as two years and inflated metrics by as much as 80 percent.
Sandberg said Facebook uses 14 different video metrics to track ad campaign spending effectiveness and said that all but one were being calculated correctly. However, she said one thing that could help in the future is if the overall tech and advertising industries were to come up with a more uniform way of measurement that helps keep the “entire medium” accountable.
Just a day or two before the video metrics news became public, Facebook announced a number of new partners focused on letting advertisers receive measurement from third parties.
“There is very universal agreement that the industry needs to evolve to metrics that matter,” Sandberg said. “And the beauty of the mobile environment, because it’s a personal device, we have the ability to measure things in a way that we could not before on any other medium.”
Facebook’s in the “really early stages” of monetizing video
Sandberg said Facebook is still focused on growing the use case of livestream and Facebook video. She said it’s still in the “really early stages” of monetizing video.
Carolyn Everson, Facebook’s vp of global marketing solutions, pointed to recent marketer experiments with live video such as General Electric using it during the Summer Olympics in Brazil.
Sound on vs. sound off
Facebook is continuing to experiment with autoplaying sound and leaving it off when it comes to both user and advertiser videos.
Everson said on average, 50 percent of time spent with Facebook video is with sound on. That includes both consumer and marketer videos. Facebook has been working with advertisers to develop creative that is both relevant with the sound on and sound off. She said Facebook has begun a small test in Australia that allows sound to be automatically played, but nothing has been rolled out much farther than that.
“I think marketers in this mobile environment need to think about both sound on and sound off considerations as they look at their creative canvas,” she said.
Facebook at Work
On Tuesday, Tech Crunch reported that Facebook at Work—the company’s social networking tool for offices to communicate and assign tasks—is set to launch next month, leaving some to ask how much will it cost and how will it run. Everson said the company is helping agencies to understand how corporate culture should evolve.
“Facebook gets asked all the time how our teams work together,” she said. “And we utilize our own products, we utilize Facebook groups to communicate with each other—it’s a very effective manner and so the interest we’ve had in the early days in beta period through Facebook at Work for our top partners has really been about how they work in corporate culture.”
Instagram’s ad load still trails Facebook’s
James Quarles, vice president and general manager of monetization, said Instagram has remained at a lower ad load since first debuting ads on the platform more than a year ago. Quarles said the company is closely watching metrics—engagement, time and sentiment—to see what resonates and what doesn’t with users.
“We say today, if you’re an active user, you’re going to see more ads than people who don’t use it as actively,” he said. “And we’ll continue to track those metrics, but we don’t have a goal per se. Just we’re several years behind tracking to Facebook.”
Asked whether there are any plans to begin monetizing Instagram Stories, Quarles said it’s a “great storytelling medium” that brands will likely integrate into their campaigns over time.
Facebook is experimenting with header bidding
Facebook has begun testing header bidding as a way to let ad exchanges compete directly with each other in a way that could drive up ad prices for publishers.
Brian Boland, vp of advertising tech, said Facebook is spending time with publishers of all sizes across various platforms—desktop, the mobile web and in the app—to see how header bidding could help increase monetization of the platform.
“It’s something that we’re intrigued by,” he said. “Early day, interesting to test.”
WhatsApp, Facebook’s standalone messaging app, has recently come under criticism after it announced last month that it would begin sharing data between the app and the rest of Facebook. (On Tuesday, a German regulator said WhatsApp needs to stop sharing information with Facebook.)
Sandberg said Facebook is in compliance in every country in which it operates. She said the company is working closely with regulators to resolve questions about how data is transferred from the Facebook-owned messaging app and other Facebook platforms.
“It’s important to remember that any WhatsApp user, anywhere in the world, uses our product with their consent,” she said. “Consent to our terms, and that certainly happened in this case.”
Asked about monetizing WhatsApp, Bosworth replied with Facebook’s standard line of focusing first on user experience before experimenting with monetization.
Is Facebook still a social network?
Over the past few weeks, some platforms such as Snapchat and Twitter have distancing themselves from the classification of being a social network. Asked whether Facebook still a social network, Sandberg laughed.
“There are so many jokes to crack about that,” Sandberg said. “I just don’t even know where to start so I’m not going to crack any. It’s certainly not even a term I think we’ve used in a while.”
Everson said there are still “buckets of budgets still” in the ad industry that are still described as “social media buckets.” However, she said Facebook has been focused on moving away from social metrics in favor of business metrics. So while likes, shares and comments might have been important earlier on, the company is now more focused on driving sales and traffic.