How the 'Facebook shrug' will change Facebook forever

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When the Cambridge/Facebook scandal first broke, financial analysts held their breath to see if ad dollars would flee as the depth of the breach in trust became obvious.

This question seemed settled with Facebook's crushingly impressive first-quarter financial results, which reassured analysts that advertisers merely "shrugged" at this news, as they had to all previous tracking glitches, algorithm misfires and feature failures. In fact, there was growing consensus that as long as users stick with Facebook, advertisers will stick with Facebook too. A shrug, many believed, was marketers' proverbial white flag of surrender to the ad duopoly that dominates the marketer's landscape.

Yet it is a mistake to take the "Facebook shrug" at face value because there's a lot going on beneath the surface that will significantly impact Facebook's financial future. In fact, advertisers haven't capitulated but are quietly rethinking Facebook's role as part of a new and dynamic trust-marketing architecture built on three principles:

1. Reunification of media and creative functions under one agency roof

Facebook became a mega media platform precisely because it "re-bundled" media and creative, filling a void left by the "Great Unbundling of the 1990s," in which clients sought to manage lower media labor costs separately from high creative costs. Today, though, the "unbundled" agency model is counter-productive because media has become as labor-intensive as creative work (maybe more so). Beyond that, trusted marketing relies on data to drive both creative and media, requiring a unified execution plan—from messaging to media. As agencies become re-integrated, they will re-allocate Facebook budgets by choosing newer technologies to express their integrated brand marketing visions.

2. Emergence of "brand to demand" contextual marketing

The ability to link branded content activities directly to sales or leads, sometimes called "brand to demand" marketing, remains the gold standard but is elusive because ad tech is so fragmented. Here, too, Facebook stepped in to give advertisers a seamless single platform to run branded campaigns along with large audiences to slice and dice at will. Yet since the Cambridge episode, hallmarks of Facebook vitality such as time spent there have taken a hit.

Edison Research earlier this year found that for the first time since 2008, the portion of Americans reporting they currently ever use the service has declined to 62 percent from 67 percent among Americans at least 12 years old. New data from Nielsen also shows that, significantly, Facebook's core platform lost 18% in time spent last year. As Facebook's ubiquity erodes, advertisers will adjust budgets and turn to new alternatives for "brand to demand" acquisition marketing.

3) New priority on establishing trust with consumers

Brands understand creating trust is very very tough but a critical competitive differentiating attribute. Facebook helped advertisers establish trust through the Facebook "trust halo" but this too is declining since the Cambridge Analytica scandal. Now 66 percent of consumers have lost trust in Facebook, according to an NBC poll. The financial consequences of this steep loss of trust are significant for Facebook. Increasingly, advertisers will divert funds into new communications tactics—i.e.—advocacy advertising that don't undermine brands' trust efforts, visibly moving brands closer to consumers' evolving "trust" demands and further from Facebook.

Whether Facebook can withstand any storm is a hypothetical question, but what is not in doubt is that post-Cambridge, advertisers will fundamentally change how they use Facebook. And in the process, they will fundamentally change Facebook forever.

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