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What happened to Apple breaking Meta’s near perfect ad model?
In early 2022, obituaries were being written. The party was over, as Facebook/Meta/Whatever’s vaunted attribution model had been shattered by Apple’s decision to crack down on mobile ad tracking.
The vast majority of people who use Apple devices elect to opt out of letting Facebook track them across other apps, meaning that Facebook’s ability to tell advertisers whether their ads drive people to take action off of Facebook’s apps was over - meaning that Facebook’s superpower was gone.
And while the company vowed to rebuild its ad technology, that was supposed to take forever, and may never work the same again.
Well something’s working.
Yes, Facebook has drastically reduced headcount in the name of profitability and efficiency. And there are currency reasons for Meta’s strong quarter that The Information’s Martin Peers lays out here. Regardless, ad revenue was up 12 percent. You can’t fake ad demand with accounting.
Clearly, a good number of Facebook’s 10 million advertisers are finding the platform to be effective - and the company says that is due to an investment in AI. Much like Google’s Performance Max, I’m not sure I or most industry experts fully understand why or how Facebook’s AI works, but it’s the latest example that technology taking over vast swaths of digital advertising. More on that another time.
Did we over estimate the impact of Apple’s mobile ID shutdown? Was this recent slowdown really just an ad recession? After all, Google also had a strong quarter, including YouTube, which saw revenue climb for the first time in three quarters. Then again, Snap - which had been hit hard by Apple’s changes- had a rough quarter, and the company is still looking to retool how it’s ad business works.
Are these Facebook engineers just that good? I mean, take a whirl through Instagram. Maybe it’s not as magical/mindread-ey as it once was, where DTC brands could be born overnight with nearly no consumer acquisition costs, but the ads are still pretty well targeted. They are connecting the dots somehow.
That should worry the rest of the ad world. Facebook’s shift to an algorithm that is driven by popularity (like TikTok) and less by friends and family appears to have born fruit, as usage is up, even for the old fashioned, supposed to be DOA blue app.
Meanwhile, Reels - Facebook’s TikTok knockoff - is on a roll. The company reported the product is enjoying a $10 billion run rate. It still feels like Facebook is just getting started monetizing Reels, which should make even TV sellers nervous. Think about how hard it is for a Netflix or a Disney+ to build up a decent base of consumers to sell to advertisers. Reels is generating 200 billion daily views, per Variety. BTW, YouTube Shorts now has 2 billion logged in users. I know, short form video isn’t TV and vice versa, but if I’m Meta and Google, I’m pushing to have a conversation with the industry - and researchers s like Nielsen- about how the reach of my short form platform is comparable or better than TV.
But I digress. Before big tech goes after TV, it’s looking to reassert its duopolistic dominance. In the case of Meta, if that company’s ad product is firing on all cylinders again, the whole ad business should be afraid.
“200 billion daily views” -- I had to read that a few times and click that Variety link to make sure I wasn’t misreading that claim. There are pretty widely varying numbers available for IG’s current user count, but if we go with the average claims of 2B monthly active users (MAUs) and 500M daily active users (DAUs), in order to hit 200B daily views of Reels, every DAU has to watch an avg. of 400 reals per day. While some demographics (e.g. younger audiences) definitely engage with Reels *far* more than others, even allowing Meta a liberal overestimation on that count, those Reels daily view numbers sound like total horseshit.