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How do the future fortunes of Facebook look?
As Facebook prepares for its latest earnings call today (24 July), I truly believe the future will continue to look rosy for the world’s biggest social media platform. Looking into our data around brands’ use of Facebook’s services in the last quarter, we can see that all the evidence points towards a strong Q2 performance.
A good place to start is the key metric for consumer products: Daily Active Users across the Facebook services. This continues to grow mainly on Instagram, which always bodes well for earnings calls. There is also more general intent to spend more on Instagram – this is what we are hearing directly from our brand customers in the fashion and beauty industries. It doesn’t look set to falter anytime soon.
Another key metric to look at is the cost-per-click trends across Facebook’s services. We can see that cost per engagement is continuing to increase. On average we are seeing an increase in cost-per-click of 12%, and some regions have shown an even more significant change – up to 45% in the Middle East compared to the same quarter in 2018.
Because of this, we can expect to see Facebook continue to report strong earnings across its services. While the $5bn Federal Trade Commission fine announced in its previous earnings might impact the numbers somewhat, this is unlikely to dampen the general outlook, or be a reason for Facebook to perform underwhelmingly in its Q2 report.
The new kid on the block
While all our metrics indicate that Instagram is getting more love from users and brands, we are hearing about TikTok more often than ever in our conversations with budget holders at brands. TikTok has scaled well and has actually already started experimenting with paid content, but this is being taken to the next level. More and more enterprise brands are looking to dip their toe into TikTok to learn about what the platform can offer. Largely, brands want to know the quality of engagement and type of audience they can acquire and engage with over the TikTok platform.
However, early adopters who have been running experimental campaigns on TikTok, that we spoke with, have not achieved the same level of return (in terms of cost vs. engagement) that they are seeing on Instagram – at least at this stage. That said, while the platform is still in its infancy if there is anything out there that might compete with Facebook’s services and revenue, it’s TikTok.
Relevance, not personalization
Being on top of what TikTok might hold is just the tip of the iceberg for today’s marketers. To succeed in such a digital-first world, every marketer knows that they need to own the entire customer journey. This goal has become even more challenging with millennials (and centennials) who no longer visit the Brand.com website but spend more of their time across multiple digital channels. Obviously, social is top of the list.
While a unified marketing platform that sources customer and audience data from all channels and data sources is crucial, the key challenge is producing relevant content quickly and at scale for each digital channel, every single day.
Every marketer lives and breathes personalization these days, but it’s nigh-on impossible to produce the amount of content to serve each and every individual out there. Instead, their goal should be to create relevant content for the key personas in their audience – relevance is the goal.
Hyper-personalized messages are robotic – even creepy – and may also not comply with GDPR. Rather, relevance is created by making the most of customer intelligence without the use of personalization.
Facebook’s recipe for success
When it comes to personalization and relevance of content, there is a King of the castle: Facebook. This has everything to do with their earnings success.
Being relevant to an audience requires marketers for a continuous process of learning about their audience, their interests, their feelings and how they want to engage with a brand. Once relevant content is produced, the last mile of selecting said content and serving it to the individual is what a platform like Facebook – the master of personalization – does best.
It is not surprising then, that the Facebook platform reports back to marketers on the relevance score of their content to their target audience. This is a valuable signal that helps marketers further improve their content to reach more consumers faster and cheaper, and further benefit from the scale and personalization technology that Facebook offers the market.
With all its data about each individual, the Facebook platform provides marketers with a service that enables them to acquire consumer engagement at scale. Marketers love it and as a result, keep increasing the spend across the Facebook services.
Until a new service comes along and topples Facebook’s level of scale and personalization technology, we can expect to see Facebook's earnings continue to shine.
New services, new revenue streams
But Facebook is looking far beyond this as this quarter’s earnings roll around. The announcement of its new cryptocurrency Libra, together with the enhanced core services Facebook offers to allow customers to transact with businesses, lead us to believe that Facebook has a great opportunity to become more than the largest social media network. It will soon become the largest e-commerce platform on the planet. This could happen even in regions where credit card and e-banking is limited.
Despite TikTok, younger consumer demands, and increasingly squeezed marketing budgets, Facebook isn’t fazed – it always has one eye on the future. While we expect strong earnings will be reported today, the Libra-led long-term vision for the platform has great potential to drive Facebook’s revenue and growth even further.
Yuval Ben-Itzhak is the chief executive of Social Bakers
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