Home Commerce Why Meta Pins Its Hopes To Payments

Why Meta Pins Its Hopes To Payments

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Welcome to AdExchanger’s Commerce Media Newsletter, where we explore the open savanna that stands before the retail and ecommerce industries. I’m your guide, James Hercher.

In my first two dispatches, I focused on Google’s Performance Max shopping product and Shopify Audiences, which represents Shopify’s entrée into advertising. This week, we’re tracking a different apex predator: Meta.

And we’re also bringing more scoops.

Why Meta needs Shops

It’s not hard to understand why Meta is prioritizing ecommerce advertising with Advantage+ Shopping campaigns, Shops and Checkout on Facebook and Instagram.

Meta must reignite its overall advertising business.

Remember in 2018 when Facebook and Instagram deprioritized news in the feed in favor of posts from friends and family and, more recently, when Meta increased the amount of short-form video on its platforms?

Meta made those moves by taking its cues from users. If people prefer short vertical vids and less news, well, that’s what will Meta provide.

But Meta’s pivot to commerce is different. One-click, in-app shopping isn’t an organic trend. Meta needs to get people shopping on Facebook and Instagram to deal with signal loss.

More with less

The Meta ad platform has been in disarray since late 2021, when Apple rolled out ATT and Apple device owners began disabling cross-app tracking.

Since then, Meta has been trying to preserve the statistical significance of its data. For example, it changed the best practices on its platform to recommend fewer creatives and less-focused targeting and it dropped user-level measurement standards.

Why? Fewer creatives and a broader view of the audience means more statistically significant measurement.

But not even Meta can just make fetch happen.

The latest casualty of Meta’s signal loss is the “Inspect Tool.”

Starting last month, in Meta’s ad manager, advertisers stopped seeing the Inspect Tool, which they’d used to visualize reporting for an ad set. An ad set is Meta’s term for when one or more creative assets share targeting and optimization criteria.

The tool allowed advertisers to view metrics over time, such as first-time impressions, the rate that ads reach first-time versus repeat customers, the saturation of a target audience and cost per landing page view.

Two ecommerce agency buyers told AdExchanger that Meta account reps relayed to them that the Inspect Tool will not return.

A Meta spokesperson confirmed with AdExchanger that the Inspect Tool was removed in January, but said the insights will be resurfaced within the Account Overview section of the ad manager. For now, at least, many of Meta’s most useful campaign analytics are gone.

One might wonder whether Meta is doing away with the Inspect Tool for privacy reasons. But sources tell me this isn’t a privacy issue. This is about Meta’s ad platform no longer being able to report many of those metrics with statistical significance.

But first-party transaction data could restart the Meta flywheel, because purchases can be used to create statistically significant lookalike audiences and attribution reports with relatively little data.

Buy your love

To get the transaction data train moving, though, Meta must grease the tracks.

Since Facebook and Instagram Shops are forcing adoption rather than responding to user behavior, they must push hard to gain ground.

Meta’s main commerce products are Shops, which are Facebook and Instagram business storefronts, and Checkout, which advertisers integrate so users can make purchases directly on Facebook or Instagram. (Checkout also prompts users to load their credit card info.)

But just because Meta is building a mall of sorts doesn’t mean shoppers will show. And so, since its launch, Meta has incentivized brands to use Shops by offering ad discounts if they agree to direct traffic to Facebook and Instagram purchase pages rather than their DTC site.

In February, Meta emailed advertisers using Advantage+ requesting they change their campaign optimization to “website and shop,” which gives Meta discretion to direct users to a Shop page or the brand’s site. (Advantage+ campaigns are closely controlled by Meta’s machine learning rather than by the advertiser.)

Unsurprisingly, Meta’s algorithm prefers Shops pages, whereas sellers prefer their site, according to five advertisers I spoke with who use the “website and shop” option.

The advertisers did acknowledge, however, that campaigns perform better with the Shops option turned on.

Meta is more effective over time when it’s familiar with the target audience, said one buyer. “If you reach critical scale of sales in Shops pages,” he said, “your platform campaigns, lookalikes and attribution are going to get better.”

Three DTC agency ad buyers also told me that Facebook and Instagram are quietly subsidizing purchases via Shops pages with Checkout enabled.

Unlike Meta’s subsidies for Shops ad traffic, which are discounts on the media, these subsidies are 20% of the purchase price. Facebook Checkout, for instance, breaks out that 80% of payments come from the user’s credit card and the rest is “paid by Facebook.”

The discounts are a mystery to many buyers. They appear intermittently, only for US sellers and customers, and also only when advertisers dig into Facebook sales reconciliation reports. And though Facebook or Instagram are usually credited for covering the cost, sometimes the promo is listed as a “Shipping Discount.”

One agency buyer said she believes the subsidies were a holiday deal that just hasn’t been turned off.

And she’s right.

In October 2021, Facebook and Instagram announced a holiday deal of 20% off first-time purchases via Shops.

Apparently, that holiday promo just quietly never stopped, or at least was reactivated without notice until late last year and hasn’t been turned off.

Regardless, sellers are grateful. But they also said it’s worth pointing out that the discounts may disguise the true sustainability of Meta’s shopping ads performance.

An advertiser that has just turned on the “website and shops” option will see Meta optimize more toward its Shops page no matter what, said one retail marketer that’s been testing it. And on top of that, Facebook and Instagram are dishing out discounts that affect the conversion rate of those pages.

Again, advertisers love that Facebookagram covers 20% of some sales, said the same retail marketer. Normally, offering a big discount means giving up profit margin. But when the Shops gravy train comes to a halt, he said, advertisers may find that they’ve overshifted traffic to Shops pages at the expense of their own site traffic.

Meta isn’t slowing down, though, even if some advertisers are skeptical. In its email to advertisers offering the “website and shop” option, which was shown to AdExchanger, Meta didn’t actually offer an opt-out. The “No” option was phrased as “Not now.”

The implication was that, at some point, Meta will take matters into its own hands and simply send its users to its in-app purchase pages.

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