arrow-left
Back to blog
Business

The Facebook Advertising Empire

August 22, 2019
Facebook has provided users with instantaneous communication, reconfiguring social tribes into group chats and providing a large portion of the world information through the news feed. While networked communication is not exclusive to Facebook, they have monopolised the social media world through the acquisitions of Instagram and WhatsApp.

Today, there are 2 billion people around the world with communication tools more advanced than the president of the United States had 20 years ago. Facebook has provided users with instantaneous communication, reconfiguring social tribes into group chats and providing a large portion of the world information through the news feed. While networked communication is not exclusive to Facebook, they have monopolised the social media world through the acquisitions of Instagram and WhatsApp. The addictive efficiency with which Facebook has conquered the internet and restructured peoples lives leading many to be ignorant of, or just forget, that the company survives by making 96.6% of its profits from advertising. The health of the advertising industry therefore is based on two facets. Firstly, the public attitude towards targeted advertising. Secondly, that targeted advertising is a successful method for gaining audience attention. I argue that while targeted advertising is widely unpopular, users tolerate it because they would like free access to products. On the other hand, research suggest that the impact of targeted advertising has been over exaggerated and the industry as a whole is declining.

2017 Stats on Global Social Media Users

User Attitudes Towards Targeted Advertising

Research by myself and Turow demonstrate a wobbly irony at the foundation of the social media empire: people don’t like their data being used for adverts. Turow’s survey of 1506 Americans found that 86% of users did not want their data to be used for tailored advertising. My own questioning of 33 Londoners found that just 27% were happy with the use of their personal data for targeted advertising with 72% finding online advertising intimidating. This could suggest that Facebook’s monetization strategy is limited in appeal — the more that people find out about their data being used, the more critical they will get and the more they will demand Facebook stop using advertising to fuel social media. However, while targeted advertising is widely unpopular, being able to use Facebook for free is very popular.

Srnicek’s text Platform Capitalism acknowledges that while the public are concerned about the extraction of data, they are not ‘willing to pay to protect it’. The popularity of Facebook, used by around ¼ of the world population, is a sign of support for the free advertising model. This strategy of monetisation is shared amongst all major social media platforms such as Twitter, Snapchat and YouTube, demonstrating that it has become the norm to not pay for online socialisation. In many ways the research done by myself and Turow is misleading. People do not conceptualise Facebook through its monetisation scheme as this would be like asking people what they think of their favourite television programme based on the commercials.

Impact of Targeted Advertising

Facebook offers the technologically advanced and cost efficient way of reaching users, readers and viewers with products, however, getting users to engage with adverts is a very difficult thing to do.

Research demonstrates that audience interest in advertisements has always been very low. Southgate’s text The emergence of Generation Z and its impact in Advertising argues that those born after the 2000’s, the users most immersed in the internet, there is a ‘low’ receptivity to digital advertisements and ‘even lower’ for mobile adverts. Despite the technological efficiency of targetting adverts, on the whole, they remain ignored. Smith provides the figure that 3 in 10,000 people click on targeted adverts, and that ‘even when users are motivated by intent, clicks don’t correlate very strongly to effectiveness’.

Fulgoni, writing in the Journal of Advertising Research, casts doubt over the correlation between targeting advancement and branding success describing how ‘few stopped to ask whether these were the right outcomes to optimize and in many cases they were not’. Moreover, Srnicek details how digital advertising spending is expected to slow to 9.5% from 2014 to 2019 down from 14.7% between 2009 and 2014.

If targeted advertising is not impactful then Facebook will likely lose investment and need to radically change their monetisation strategy. With such large troves of data, they will need to be proactive in ideas of how to make money. In the next ten years, the company are developing Artificial Intelligence and Virtual Reality. For the Facebook Empire to survive these could provide new opportunities for the company to grow. Without such, the targeted advertising bubble could burst, leaving Facebook’s strategy bankrupt.

Conclusion

This essay has entertained the reaction and impact of targeted advertising on Facebook. The research of myself and Turow shows that customers consistently do not like their data being used for targeted adverts, however, in the context of paying for Facebook they will tolerate it. More concerning for Facebook is the idea that the impact of targeted advertising seems to be waning. While technologically microtargetting is far more advanced than what came before it, users continue to ignore advertising and investment is decreasing. With just 3.6% of Facebook’s profits being made without advertising, it is likely that the company will be eager to find new monetisation strategies. The next question to ask is if Facebook, the worlds infrastructure of socialisation, where to stop making a profit would governments invest to prop up this networked empire?

Written by Sam Guiness - Technology writer from London

Business

5 Mistakes You Are Making In Creative Testing For Performance Advertising And How To Fix It

Do you remember these times when all marketers cared about campaign setup, bidding, and targeting? I do! It’s a mistake that is constantly made even by experienced marketers. These days when Facebook and other platforms like TikTok, Snapchat, or Pinterest have enough data to build a block of hard drives reaching to the moon (joking!) We all know that creativity is the most important factor in your campaigns. Also, as Naval Ravikant once said — it’s barely impossible to automate creativity.


Want to reach users that love your app?

Let’s build the future.

Coming June
Join now for early access.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
By signing up you agree to our Terms & Conditions