Facebook is suddenly paying dearly for big misses on shopping and video
The new duopoly maybe be Google and Amazon
Here are some fun headlines and quotes from circa 2011-12:
“5 Reasons the Time for F-commerce is Now” - Adweek
Facebook Just Opened The Door To A Social Commerce Function That Could Be MASSIVE - Business Insider
It’s a matter of time—within the next five or so years—before more business will be done on Facebook than Amazon” Sumeet Jain, Principal, CMEA Capital (Social Commerce Times)
I’m not trying to pick on anybody for betting on Facebook’s ability to create a massive new market more than a decade ago. Rather, it’s striking to look back and recall there was a time when Gartner actually had a category called “F-commerce” and brands like JC Penny’s were opening and then closing ‘f-stores’ and there was an actual publication called SocialCommerceToday.com.
It maybe didn’t seem that big of a miss at the time, but in light of Meta’s stunning earnings stumble this week- juxtaposed against Amazon’s unbelievable ascendancy as an absolute advertising juggernaut - boy did Facebook blow it on e-Commerce. And also video (it’s apparent new savior). They are paying dearly for both misses right not.
More on the video part in a minute.
The thing is, clearly, social commerce did take off - just not in the way many had expected. We all know that Facebook drives an inordinate amount of digital leads and transactions and conversions for marketers. Over the past decade, thousands of direct-to-consumer brands have been born on Facebook and its subsidiary Instagram. In fact, Ad Age reported that Instagram still drives the majority of conversions for most DTC brands. The app is basically consumerism incarnate - you scroll around, much like you’d flip through magazines in the old days - except in this case you just click and buy whatever recliner or shaving tool that pop into your feed without even thinking about it.
So social commerce sure works on Facebook and Instagram. Only you don’t actually buy this stuff on those platforms.
Which wasn’t a problem at all for quite a long time, as long as Facebook could prove that the transactions that took place on retailers sites or Amazon or wherever happened directly because of FB or IG ads.
And then Apple, with its new tracking rules, nuked that capability.
Meanwhile, increasingly digital advertising is all about having advertising and transactions joined at the hip. No assumptions or projections or data connections necessarily. It’s why Retail Media went from not being a category to one that eMarketer predicts will exceed $50 billion by 2022 and account for a stunning 20% of all digital ad spend. It’s why Amazon, which thought so highly of advertising for years that it labelled it an ‘other’ -just pulled in $31 billion in 2021 in ad revenue. When you’ve got your own data, sell your own ads, and the deals happen on your property - it doesn’t matter what Apple says. Amazon’s share of the market won’t be at 10% for long.
Despite having more identity data than any company in existence, Retail Media is a category Facebook doesn’t play in. Which is why the company’s e-Commerce foibles are so brutal right now, and it’s why you’re seeing Zuckerberg desperately race to make buying on Facebook ‘Shops’ a thing.
Meanwhile, Zuckerberg is said to be telling the troops to focus on video. Which is a bit of a head scratcher, given Facebook’s struggles to turn video into consistent dollars. Shira Ovide in the New York Times had a great post this week on how Facebook jerks around media companies, brands and creators by dabbling in areas like messenger bots or crypto currency.
These dalliances aren’t just bad for partners, it’s bad for establishing new long term revenue vehicles. Lets look at video specifically:
A few years back, Facebook was regularly boasting about generating 8 million views per day in its news feed, while encouraging publishers to build content designed to pop in this autoplay environment. It was clear from the start that there was no way to slap pre rolls or mid-rolls within these clips to monetize this massive consumption. Please tell me if I’m wrong, but this seems to have never become a cash cow.
Nor did ‘Suggested Videos’ or Facebook Live
Facebook Watch and IGTV once commanded lots of attention and investment, and now seem to just - exist. Is Facebook a big player in the battle for web video or TV ad market? You tell me.
Oddly, Facebook is absolutely nowhere in advertising’s other rocket ship growth area - CTV, even as Amazon Fire surges past Roku, and Google pushes deeper into TV software. There is a $70 billion market sitting there that FB seems to have no claim to
Yes, as Big Technology’s Alex Kantrowitz pointed out, Instagrams TikTok knock off Reels is exploding in usage, driving more Instagram downloads in late in 2021. Reels is likely under-monetized. Yet what would give you confidence that Facebook has a plan to change that?
After all, Facebook has long been about catering to it’s astonishing 10 million or so advertisers- millions of small to midsized businesses - with simple-to-use ads and targeting tools. Are these brands going to crank up Reels advertising?
To me Reels feels best aimed at brand advertisers…and that takes time. YouTube is an amazing success story - yet it took the brand roughly 15 years to become a serious contender for TV dollars
Am I saying Meta is doomed? Hardly. We’d all love to have bad quarters where you bring in $34 billion. No, It’s not great that fewer people are using the core product each day (It’s not totally surprising to me, considering that Facebook’s primary use case these days seems to be a forum for fighting about masks in schools). But Facebook has enormous resources to turn on new potential revenue streams.
Like say, the metaverse. Except there’s little to no money (or users) there today. Plus, don’t forget, Apple is coming.
So in the near term, it seems that Facebook needs a mix of discipline, focus. and targeted aggression to reboot its ads story. Zuckerberg’s approach has long been to ‘move fast and break things.” Yet Bezos and company are here, and their approach is more along lines of ‘find something that works, and then absolutely dominate, destroying all others in our path.’
So maybe the duopoly as we’ve known it is dead. Long live the new Duopoly.