Facebook has warned investors to expect a pronounced revenue slowdown in the second half of the year and into 2020 thanks to “ad targeting-related headwinds.”
And Instagram can expect to weather the same challenges.
Instagram has been a growth driver for Facebook, both in terms of engagement and ad spend. The two share data between them and a backend advertising platform that makes it easy for advertisers to expand their buys from one to the other.
So if there’s a targeting-related headwind blowing in Facebook’s direction, Instagram is also going to catch a draught.
“It’s safe to assume any impact of ‘negative headwinds’ on Facebook would have a direct and immediate impact on Instagram as well, as those platforms are so closely linked together,” said James Douglas, SVP and head of media at IPG-owned Reprise. “Controlling their platform likely does mean rethinking and rolling back some core functionality that makes them distinct and different.”
And although Instagram has been largely insulated from Facebook’s repeated privacy and security scandals – despite not being immune to lapses of its own – consumer distrust could start to spread from Facebook to Instagram, said Carly Carson, director of social at PMG.
How the wind blows
Facebook’s, and by extension Instagram’s, ad targeting and measurement challenges are caused by three interrelated trends: data protection regulations coming into effect around the world; an increasing focus on privacy at the operating system level; and, as Facebook CFO Dave Wehner noted during the company’s most recent earnings call in July, Facebook’s own product changes, such as Off-Facebook Activity, which gives users the ability to control the data that third-party apps and sites share with its family of apps.
The net result of these shifts, but particularly Facebook’s internal privacy-motivated product tweaks, could cause remarketing audience sizes to shrink, Carson said.
“We would expect to see audience sizes decrease on both Instagram and Facebook,” Carson said. “Advertisers will have to broaden their audience targeting definitions, potentially leading to less qualified users and dips in performance.”
As this dynamic plays out, certain retargeting and prospecting strategies, specifically those that rely on advanced pixel-based signals, will likely become more and more limited in terms of scale and sophistication and that could “hinder the growth outlook for direct response initiatives” not just on Instagram, but across all Facebook properties, said Jon Morgenstern, SVP and head of investment at VaynerMedia.
But despite these challenges, there’s not much that could jeopardize Instagram’s spot on the media plan in the short term. Instagram still has solid scale across feed and Stories placements with competitive performance compared with the broader Facebook ecosystem and the digital ecosystem at large, Morgenstern said.
Longer term, though, ad spend depends primarily on whether users stay or shift away from Instagram, and all evidence points to users sticking around.
User growth is also still firmly in the cards for Instagram – and even Facebook, for that matter, headwinds be damned. Although eMarketer projects a decline in some global markets (South Korea, Japan, The Netherlands and France), Facebook is slated to grow overall in 2019, up 5.9% from last year, to 1.76 billion monthly active users (MAUs).
Instagram’s worldwide user base will grow 11.4% in 2019 to hit 786.8 million MAUs.
“Advertisers will continue to use Instagram, simply because consumers continue to use it and its base is still growing pretty steadily,” said Debra Aho Williamson, a principal analyst at eMarketer, noting that advertisers are also besotted with Instagram’s Stories format, which has been growing like gangbusters.
“Stories gives Instagram momentum that could help shield it, although perhaps not completely, from some of the targeting challenges that might hit Facebook,” Williamson said.
It’s also unlikely that users will take advantage of homegrown Facebook privacy features, like Off-Facebook Activity, en masse. Third-party targeting data presumably won’t dry up on Facebook or Instagram.
While there might be a one-time bump in people disconnecting their browsing history from Facebook, Instagram, et al. after an initial publicity push, Williamson said, the feature is probably fated to become “just another part of the overly complicated privacy tools section on Facebook.”