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Facebook Idea Proposal (FB)

Facebook Idea Proposal (FB)
 

Were advertisers spooked enough by the data privacy and other scandals swirling around Facebook to hurt its top line in Q2?

Report Available: July 13, 2018

 

Blueshift’s initial research found FB’s stellar Q1 results quelling many fears about a series of recent controversies. However, the Cambridge Analytica scandal over data privacy first became public with just a few weeks left in Q1, and several advertising sources told Blueshift Research in April that they paused their FB ad spending in early Q2 over concerns about consumer backlash. Advertisers are also worried that FB’s plan to cut off third-party data access could hurt the effectiveness of the platform. Meanwhile, FB continues to have trouble attracting younger users.

 

Observations

  1. FB blew past analyst estimates for revenue and profits in Q1, posting a nearly 50% jump in revenue compared to last year’s Q1. Its number of daily active users worldwide climbed 13% year-over-year, though that figure for the U.S. and Canada remained stagnant. The impressive results eased investor fears that FB might suffer some blowback in the wake of the Cambridge Analytica data scandal and election-related “fake news” controversies.
  2. However, news that Cambridge Analytica may have improperly accessed 87 million FB profiles did not break until the waning weeks of Q1, leaving open the question of whether the scandal could hurt FB’s ad revenue or user numbers in Q2. Indeed, one source whose agency represents top brand names told Blueshift Research for its April 23 report that clients cut FB ad spending by 30% to 50% for April and May because of concerns about consumer backlash. Three other sources reported putting some FB spending on hold in early Q2. One source noted a small decrease in user engagement since mid-March, and another said ad impression costs dipped in the early weeks of Q2, possibly a sign of less demand from advertisers. Most sources agreed, though, that advertisers will not stay away for long because FB’s targeting ability and ad effectiveness remain second to none.
  3. Advertisers and agencies have also expressed concern about FB’s plans for shutting off access to user data by third-party providers such as ACXM. Sources worry that such a change will hurt the precision of FB targeting, especially for advertisers that do not have their own transactional data. FB has said it plans to wind down third-party data access by October, though some have speculated they might find a way to restore such access by shifting responsibility for data use to brands and third parties.
  4. FB has committed to improving its policies around data privacy and the dissemination of “fake news,” but it continues to struggle with both. The New York Times reported on June 3 that FB gave device makers like AAPL, MSFT and Samsung access to vast amounts of its users’ personal information, possibly in violation of a 2011 agreement with the FTC. To combat concerns about fake news, FB said it is continuing to adjust what types of information show up in users’ news feeds, even if that means people spend less time on the platform. Its latest move is to eliminate the “Trending” module in the corner of its desktop site.
  5. While some expect the recent controversies to fade, FB’s main platform may have a longer-term problem – its inability to attract younger users. New research shows only 51% of people aged 13-17 use FB, down from 71% just three years ago. Among that age group, FB use has been eclipsed by YouTube, Snapchat and FB’s photo-sharing app Instagram

 

Did a meaningful number of advertisers pause their FB spending in Q2? If so, did they return to the platform as the quarter unfolded? Did advertisers notice any change in user engagement that suggests people have deleted their FB accounts or are using the platform less? Did they see any pricing trends that hint at reduced demand for FB ads? How will they adapt to FB cutting off third-party access to user data? How big a problem does FB have with younger users? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Advertisers, Ad agencies, and Industry specialists.

 

Companies: Facebook Inc. (FB), Acxiom Corp. (ACXM), Alphabet Inc. (GOOG/GOOGL), Apple Inc. (AAPL), Microsoft Corp. (MSFT)

 

Research Begins: June 25, 2018

 

 

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