Mark Zuckerberg often waxes philosophical about the “magic” of technology. The Facebook founder’s best trick, however, may be conjuring up millions of non-existent users, and then using them to convince companies to plough billions of pounds in advertising into his ever-growing empire.
The Sunday Times recently created an advert targeted at 20 to 34-year-olds in Britain — a much sought-after slice of the population. Facebook’s advertising system claimed that, based on that parameter alone, our ad had a “potential reach” of 17m people.
The problem is, according to the official British census last carried out in 2011, there were only 12.3m people in that age range — 4.7m fewer than Facebook says its ads could reach.
Even allowing for modest increases due to births and immigration since the last official headcount, it beggars belief that the population of millennials and that of Generation Z has exploded by 4m-plus. The social media giant has been caught out by similarly bloated estimates in America and Australia.
Facebook said the estimates were based on “a number of factors, including Facebook user behaviours, user demographics and location data from devices”. It added: “While these non-billable estimates are created to help better plan campaigns, they are not designed to match population or census estimates. We are continually working to improve our estimation signals and will share updates when we have them.”
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Taken with the controversy over “fake news” and declining engagement among its core users, a growing number of top advertisers have started to rebel against Facebook and its ilk.
Facebook, meanwhile, has suffered the equivalent of a very public personal breakdown. Over the past two months, executives, including Zuckerberg, 33, have been furiously penning “Hard Questions”, a series of long, often rambling blog posts exploring — and usually gently dismissing — fears that Facebook is bad for democracy, promotes terrorism and may be bad for your self-esteem.
Brian Wieser, an analyst at Pivotal Research in New York, claims the advertiser backlash, coupled with Facebook’s sheer market share and its unfolding identity crisis, are signs that we may be approaching, “peak Facebook”.
The $552bn (£390bn) giant promised to blow away the perceived inefficiencies of advertising on TV and radio and in newspapers and magazines. In its place, a new system emerged, powered by algorithms, that allowed advertisers to broadcast their message to specific users, based on gender, sexual orientation and income. Or in the case of The Sunday Times’s ad, age and geography.
Companies are awakening to the reality that it often falls short of that alluring promise. Wieser said: “For a long time, marketers were taking digital metrics without too much questioning, in large part because they did not know what the right questions were. A combination of things over the past two to three years made questioning digital a more acceptable practice.”
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Last year, Unilever’s marketing supremo Keith Weed — who controls one of the world’s largest advertising budgets — warned he would move his money from sites that could not demonstrate that ads were viewed by humans, rather than robots. Procter & Gamble, the world’s biggest advertiser, went further. Spurred on by anger over how its ads had appeared alongside repugnant YouTube content from Isis recruiters, neo-Nazis and paedophiles, it slashed more than $100m from its online marketing budget in a single quarter — without seeing any impact on its bottom line.
To be clear, Facebook’s decline and fall isn’t happening any time soon. Wieser estimates that the Google and Facebook duopoly will capture 80% of global digital ad revenue in 2018. Facebook is still wildly profitable. Analysts expect it to announce that profits have nearly doubled to $17.6bn on $40bn in turnover when it reveals its 2017 financial results on Wednesday.
Any weakness in core Facebook that runs into 2018 will be more than offset by runaway growth at Instagram, it’s picture-sharing app. And, for now, the company still has plenty of room to make up in price what it may lose in ad volume.
What’s clear, though, is Facebook’s image problem is getting worse. Speaking at the World Economic Forum in Davos last week, investor George Soros said Facebook and Google were a “menace” to society that have “neither the will nor the inclination to protect society against the consequences of their actions”.
Marc Benioff, the billionaire software tycoon, compared social media’s addictive quality to Big Tobacco and urged similar “public health-style” regulation. Former Facebook executives such as Sean Parker are coming out of the woodwork to disown their creation amid worries about the psychological damage it may be causing to young people.
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Facebook’s putrifying perception among the public has not endeared it to advertisers, to be sure, but it isn’t fatal. Companies want to sell products. If advertising on Facebook is the most effective way to acquire customers, most will stomach its less savoury aspects. However, top advertisers are becoming more discerning about its shortcomings. Fraud, for example, is rife. According to industry estimates, about half of online ads are viewed by networks of hacked devices programmed to generate fake clicks. Video ads, an area of huge growth, have become a lightning rod for discontent.
In numbers
Advertisers pay hefty rates to insert their commercials into Facebook users’ news streams, even though most are viewed for no more than a couple of seconds. Phil Smith, director general of ISBA, an industry group whose members include Unilever and Procter & Gamble, said: “Companies are starting to question whether their ads have even been seen.”
For good reason. Facebook counts an ad as “viewed” if as little as a single pixel makes it on the screen for any amount of time, however fleeting. GroupM, a New York media agency that is part of Sir Martin Sorrell’s WPP conglomerate, was unhappy with that classification, so has created its own metric. GroupM’s standard requires 100% of a video picture to be watched, in many cases, for at least half its duration. Facebook does not recognise GroupM’s measure, even though the agency relies on it to help shape campaigns and manage expectations of its clients. John Montgomery, GroupM’s executive vice-president of brand safety, said: “The sophisticated advertisers are beginning to understand the value of measuring quality versus just pure tonnage. An ad that is not viewed has no value.”
Zuckerberg shocked the publishing world this month when he unveiled plans to cut news content by fifth on Facebook’s feed. He also unveiled a plan to prioritise “trusted” news sources that was swiftly mocked after a leak of the two-question poll he intends to send to users to ascertain said trustworthiness.
The questionnaire asks which news outlets from a provided list are people familiar with, and how much they trust them. The answers range from “entirely” to “not at all.” For a company that prides itself on the genius of its code, the approach feels crude. It is an admission that its algorithms are deficient.
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Zuckerberg claimed he wanted to get Facebook back to its core “mission” of connecting people. The reality, however, is that while it is still gaining members — 2bn and counting — those who are on the platform use it less and less. Time spent by average members fell by 7% last August compared with the same period in 2016, and by a further 4.7% in September, according to a review of Nielsen traffic data.
Zuckerberg appears keenly aware of the dangerous territory Facebook has entered. Last year he announced it would hire 10,000 workers to help police “fake news”, which has badly damaged its brand as well as user experience. He acknowledged this would lead to a short-term financial hit but clearly viewed it as necessary to restore faith in the platform.
Of his decision to cut news content, he wrote: “By focusing on bringing people closer together we can help make sure that Facebook is time well spent.”
For Zuckerberg, that’s an increasingly difficult task.