Last week, Facebook’s shares have dropped by a total of almost 7% on the back of very solid performance; As CNBC has reported, the platform’s earnings have exceeded analyst expectations, and Facebook has added more users than Wall Street expected. gbwhatsapp
So, what went wrong?
Much like Jean-Baptiste Colbert reported in the 17th century, “the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.” Facebook have realised that the art of advertising is to input the greatest number of adverts into a news feed with the least possible amount of hissing.
Nonetheless, Facebook’s CFO Wehner claimed that they would continue to invest in new ad products, as well add engineering talent as part of their key investment priorities.
The TJM take: Facebook are 2 years ahead of their rivals- targeting tech, but with the advert frequency growth drying up, user growth is starting to slow. Additionally, with Instagram’s engagement rate dropped by almost 23% between September and October, Facebook need to diversify.
They are doing this (and at some rate!), with investments in WhatsApp, a new jobs board to rival LinkedIn’s, the Marketplace (which a few of us in the office are about to make our first sales on), and work apps suite. Who would bet against them?
In terms of what the saturation will do for Facebook marketers and users, it will do two things:
Firstly, more competition will increase prices to advertise. More precise targeting and improved creative and user journey will be essential.
Now while that may sound all doom and gloom, it will benefit the user. Higher costs will mean more targeted adverts, and more engaging content leading to a better experience. A very good parallel is the use of Bing vs. Google. Because Bing is slightly cheaper to use and has smaller budgets, advertisers are not as tight on their campaign management as on Google. Hence you get a worse set of results if you do a search.
We still feel Facebook has some of the best targeting around and if you are smart, you can be miles ahead of other platform CPAs while providing solid volume in most industries.