The economy is weakening, and so is advertising demand — at least that’s how Facebook’s parent company, Meta Platforms Inc., justified its first-ever quarterly drop in revenue last week. Social media rivals Snap Inc. and Twitter Inc. echoed the gloom, deepening this year’s share price slump in the sector.
Meta’s Facebook algos are losing ground to European lunatics
Paris-based Publicis SA, among the world’s four largest agencies and owner of Leo Burnett and Saatchi & Saatchi, posted a 21% increase in revenue in the second quarter and raised its sales outlook for the year. CEO Arthur Sadoun, who succeeded industry icon Maurice Levy in 2017, said the company was “prepared” for a potential economic downturn.
And while it was an uneven quarter for some broadcast and print publishers, France’s JCDecaux SA, the world’s largest outdoor advertiser, reported a 22% increase in underlying quarterly sales growth, its panel range billboards, bus shelters and other street furniture continuing to attract. cash. The company expects stronger revenue growth in the third quarter.
This discrepancy is ironic given that these are the types of companies that have been eclipsed by Big Tech’s ability to collect massive amounts of data, capture digital native Gen Z eyeballs, and swallow a huge chunk of it. marketing spend in recent years. In 2021, the top five tech companies captured $409 billion in ad revenue, more than half of the market total, according to GroupM; in 2016, it was $115.5 billion. Meanwhile, advertising revenues from JCDecaux and Spanish broadcaster Mediaset Espana Comunicacion SA have declined.
If the pattern is unraveling today, it is because the influence of social networks on advertisers is weakening. While Amazon.com Inc. and Alphabet Inc.’s Google retain intimate knowledge of our shopping carts and Internet search terms, Facebook and a few others have shown their limits: a reliance on personal data vulnerable to regulatory and public opinion, a pervasive sense of advertiser distrust of a lack of transparency, and increased competition for the attention of newcomer TikTok loosened their collective grip.
Online ads aren’t suffering the same way: Enders Analysis’ Jamie MacEwan says advertisers are prioritizing advertising over search and reducing the type of display ads that power Facebook feeds. This is consistent with the response to a weaker economy, but also indicates longer-term issues are bubbling to the surface as content guidelines change in unpredictable ways. New government pressures against disinformation and political polarization make the future uncertain: Europe is preparing to step up content surveillance, while some US states are making noise to protect free speech.
Apple Inc. is making it harder for advertisers to track iPhone user activity, while Google is phasing out the use of third-party cookies on Chrome. Apple’s restrictions are clearly hurting Facebook’s ability to make money, with Mark Zuckerberg’s firm warning that the changes will lead to a $10 billion contraction in revenue this year.
And in a world described by Publicis’ Sadoun as “cookie-free,” old-school media agencies and platforms are increasingly finding ways to compete with the walled gardens of social media. Publicis and its peers are buying up data companies like Epsilon, giving customers better access to personal information obtained directly from consumers with their consent, known as first-party data.
And at the same time, JCDecaux’s billboards have come a long way from the static posters that sprouted alongside the consumer-centric automotive culture of the 20th century highways. They are increasingly digital and involve a certain level of tracking knowledge, such as location data, which allows them to offer campaigns targeting “eco-conscious vegan” consumers, for example.
That’s not to say these companies are immune to an economic downturn, but rather that recent post-pandemic trends have shifted in their favor. While JCDecaux’s revenues have suffered in China, where shutdowns continue, the rush of consumers from other regions to airports, shopping malls and tourist hotspots – even at a time of high inflation – has clearly resonated with marketers, as travel has replaced being trapped in front of computer screens. The company’s first category of advertisers are luxury goods manufacturers, which have proven resilient to inflationary pressures; their shiny lifestyle pitches translate better to posters than pixels.
Agencies have also proven themselves in the wake of the pandemic. Ian Whittaker of media consultancy Liberty Sky Advisors believes brands have realized they don’t have the bandwidth or capacity to depend on internal marketing responses to the new and evolving consumer environment, and are therefore turning to the Mad Men of old.
What happens next depends a lot on the extent of the downturn. The situation is clearly fragile, and even upcoming publicity-friendly events such as the World Cup may not be enough to offset a deep recession and energy rationing this winter. GroupM still estimates that pure digital ad platforms will grow 11.5% this year on an underlying basis and will account for 73% of the industry total in 2027.
For now, however, Meta’s ad-selling algorithms are meeting their match – and that’s something mere marketing mortals can celebrate.
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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. Previously, he was a reporter for Reuters and Forbes.
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