"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 Allison Schiff, managing editor at AdExchanger. It's part of a series of perspectives from AdExchanger's editorial team.
A vortex of bad news is swirling around Facebook.
First, there was last month’s 10-part “Facebook Files” investigation in The Wall Street Journal based on a leak of information by a then-anonymous source and former Facebook employee.
The whistleblower, Frances Haugen, revealed her identity on 60 Minutes in early October after filing a complaint against Facebook with the Securities and Exchange Commission.
But Haugen had more to share.
Over the past few weeks, she testified in front of Congress, flew to the UK to do the same before Parliament and shared tens of thousands of pages of redacted internal Facebook documents – the same material she turned over to Congress and the SEC – with more than a dozen news outlets in the US and a consortium of publishers in Europe.
Starting on late Friday afternoon and into Monday, a semi-coordinated blitz of more than 50 negative stories based on these documents, dubbed “The Facebook Papers,” hit the home pages of CNN, the Financial Times, The New York Times, Le Monde, The Atlantic, NPR, Reuters and numerous other publications. The pieces contained new details about Facebook’s inaction on the spread of misinformation during the months leading up to the US presidential election, its dysfunctional response to the January 6 Capitol riot and its ongoing failure to effectively moderate content in non-English speaking countries, often with dire consequences.
Oh, and a second whistleblower and former Facebook employee, still anonymous for now, stepped forward on Friday with allegations that seem to corroborate everything Haugen has been saying.
And yet, although Mark Zuckerberg kicked off Facebook’s third quarter earnings call on Monday afternoon with an impassioned defense of his dorm-room creation, not one investor had a single question about any of this.
Almost every question was related to the measurement issues Facebook is grappling with as a result of Apple’s privacy changes on iOS.
The reason for Wall Street’s singular focus is simple. Facebook makes money by selling targeted advertising, and Facebook’s ability to target ads to users and precisely measure the results is under threat.
Investors are spooked not because Facebook’s reputation is sunk so deep in the mud it’ll need a compass (not a moral one) to find its way out, but because signal loss and attribution woes are the only things that will cause advertisers to curtail their spending on Facebook.
The fact is, it’s already been proven that moral outrage has no effect on media buying. If it did, last year’s advertiser boycott of Facebook wouldn’t have ended the way the world likely will (as per T. S. Eliot, at least), not with a bang but a whimper.
This is not to say that hard-hitting investigative journalism isn’t vitally important, that the fourth estate can’t hold power to account and speak truth to power – or that whistleblowers are just whistling in the wind.
But a company like Facebook can absorb abuse – and media dollars – so long as advertisers continue to spend. Perhaps it’s an obvious point, but it bears repeating.
Facebook is not encased in Teflon. Reputational damage from negative headlines is real and attracts unwanted government attention.
But if Facebook can kludge together a measurement fix in the short term to deal with its attribution problem, advertisers will stick around. Sheryl Sandberg told investors on Monday that Facebook will likely be able to address more than half of its iOS-related underreporting by the end of the year. Facebook also has plans to develop more robust measurement solutions next year and for the long term.
What about scale, though? The Facebook Papers reveal a company struggling to attract and retain young users. According to reporting by The Verge, the number of teenage users of the main Facebook app in the US was down by 13% between 2019 and 2020 with a projected drop of 45% over the next two years. And Facebook’s own internal research shows that although Instagram is still popular with young adults, they’re starting to use the app less.
Still, Facebook reported a quarter-over-quarter increase across its family of apps (Facebook, Instagram, WhatsApp and Messenger) from 3.51 billion to 3.58 billion monthly users.
All of that is to say, if Facebook can clean up its measurement mess, advertisers will keep on kicking in, plain and simple.
And the rhetoric will remain just that. Rhetoric.
On stage at AdExchanger’s Programmatic IO event in New York City on Monday, InfoSum CEO Brian Lesser, for example, had much scorn for Facebook. Lesser is the former CEO of both AT&T’s Xandr and the North America arm of GroupM, one of the largest media buying agencies in the world.
His opinion matters, and he appeared to speak for many when he said, “I think Facebook is a disaster.” The audience immediately broke out in applause.
“At worst, it’s the most evil company that is manipulating social media to sow discord in our society,” Lesser said to yet more applause. “At best, it’s a horribly run company.”
Perhaps true. But in reality, Facebook just made over $29 billion in revenue in the third quarter alone – more than $28 billion of which came from advertising – and generated $9.2 billion in income, a 17% YoY increase.
As Gizmodo’s Shoshana Wodinsky noted, dripping with irony, in the headline of her story about Facebook’s third quarter earnings: “Good job, everyone!”