The Secret To Facebook’s $67 Billion Ad Machine

Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Kunal Gupta, CEO at Polar.

Facebook’s ad revenue this year – expected to be $67 billion – will be more than every other ad tech platform combined, including Google’s network business, Amazon’s DSP, The Trade Desk, Criteo, Adobe DSP, AppNexus and Rubicon. And its growth rate of 25% is faster than the rest of the industry at 18%. If your business is not called Facebook, then your addressable market is shrinking.

Facebook commands 71% of global social ad spending, with YouTube considered social. The most valued asset in social that no one talks about is the creative. Advertisers believe that Facebook works due to targeting and targeting alone, but there is more to the story.

When Facebook first opened up to brands 10 years ago, it encouraged them to develop beautiful creative because that is what led to engagement, and engagement led to organic reach. Since then, Facebook has removed organic reach, and brands have continued to build beautiful creative because it works.

Facebook creative is proven to be effective with much higher engagement rates than standard display. It is diverse and can be used to cater to a wide range of campaign objectives. And most importantly, it is familiar for users, who have been trained to engage with social posts. When compared with other ad formats, such as display ads on the web, social creative benefits from format familiarity vs. banner blindness.

The new standard

If more than 80% of ad spend is on platforms like Facebook and YouTube, none of which have banner ads, then more than 80% of creative spend is directed toward the formats supported by these platforms. About 80% of the time spent on mobile devices is on five apps, according to eMarketer: Facebook, Instagram, Snapchat, Twitter and YouTube.

None of these have banner ads. So advertisers and consumers have already moved on from banners, while the ad tech industry is propping up banners that few engage with.

Targeting strength

While Facebook’s targeting prowess is often lauded, brands should begin to worry about this perceived strength. A recent Harvard study examined what happens when a company tells consumers how and why they’ve been targeted for an ad.

People were 24% less interested in the brand if they knew they were targeted based on their general web activity, and 17% less interested in purchasing if they were told they were targeted for an ad based on what was inferred about them. Facebook does this routinely.

While Facebook continues to battle regulators and public perception, it continues winning an increasing share of advertising budgets, thanks to its reach, targeting and, equally important, creative quality. It works, and it’s time for us all to realize Facebook is the new creative standard.

Follow Kunal Gupta (@kunalfrompolar) and AdExchanger (@adexchanger) on Twitter.

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