How Meta is rebuilding its ad platform to overcome Apple's privacy changes

Meta’s big consumer event last week was Connect, where the company presented its hypothetical future in VR. It also marked the one-year anniversary of rebranding away from Facebook. But for its 10-million plus advertisers, a more important, less-flashy event took place a month earlier at the company’s first performance marketing conference, where execs explained how Meta’s ad platform is being rebuilt to handle Apple’s data changes. The Performance Marketing Summit didn’t have the same pizzazz as Connect, where CEO Mark Zuckerberg touted experimental metaverse technology, such as virtual reality avatars with legs. Instead, performance marketers—direct-to-consumer brands and small agencies—discussed a more pressing issue: how to maintain their businesses after Facebook and Instagram were cut off from vital data signals on iPhones and web browsers, marking a new period of internet privacy. The marketing transition, with less access to personal data, has been traumatic for many advertisers, and Meta is trying to fix this Web 2.0 problem, even as it sets a course for Web3 and the metaverse. The Performance Marketing Summit, as Meta billed it, was meant to reaffirm the social media giant’s status as an efficient advertising machine today. The summit brought together more than 650 advertisers to Meta’s Menlo Park headquarters, and another 1,000 online. Meta also tied the event to the metaverse, telling marketers that the adjustments they make today will translate to success in virtual commerce. “The majority of your efforts, about 70%, should be allocated to making sure you have strong Web 2 foundations,” said Eva Press, Meta’s VP global business group, during one talk at the marketing summit last month, “because metaverse technologies and opportunities will be built on those foundations, many of which you’ve already heard about today, things like ‘performance five’ and ‘creative catalysts.’” Related: Meet the Meta marketer branding the metaverse “Performance five” is Meta’s short-hand prescription for brands, referring to tactics they should adopt if they want to maintain successful ad targeting on Facebook and Instagram. The tips include joining Meta’s Conversions API, which is an ad targeting and measurement platform that keeps data flowing after Apple’s restrictions. The “performance five” is basically Meta’s roadmap for direct-to-consumer and app marketers, which built their businesses on highly targeted, personalized ads. Meta is investing in automation and artificial intelligence to run its ad algorithms, so its machines do the targeting and measurement, as opposed to the more hands-on controls marketers used to have. Meta’s performance tips also address new creative tools like Reels and how to use the TikTok-style videos for direct-response advertising. On its face, concepts such as “performance five” might seem unrelated to how Meta is building its metaverse, but the two are intertwined. The Performance Marketing Summit touched on augmented reality and virtual commerce, which are intermediate technologies on the road to Web3. For instance, performance marketers, especially those in apparel, home décor, beauty products and consumer goods, have always used product catalogs, whether through the mail or online. The product catalog is as old as modern consumerism, and in Web 2.0, with social networks and e-commerce websites, catalogs have been digitized and made shoppable within ads that link to online stores. At the summit, Meta advised marketers to turn those product catalogs into augmented reality goods, which could one day sell within virtual worlds. “So when your business is ready to lean into digital goods and NFTs,” Press said, “you have the infrastructure in place to build out those offerings.” Ad Age Next: CMO Get your tickets for the Dec. 7 event in New York Register here Picture this Polly Wong, president of Belardi Wong, a direct-to-consumer marketing agency, manages more than 300 brands and millions of dollars of ad spend on Meta’s apps each month. Wong’s brands run the gamut from apparel to luxury goods to home décor, the types of marketers that make up the bulk of Meta’s ad base; marketers like Evereve, a regional fashion retailer, and Lulu and Georgia, a home goods seller. Belardi Wong is helping brands with new marketing strategies after Apple’s privacy changes. The answer, so far, has not been a push into the metaverse, it’s been more about back-to-basics; Belardi Wong’s brands are sending more print catalogs to homes. Performance marketing looks more like it did 20 years ago, where brands are spreading money to more channels and using old-fashioned methods of measurement that don’t hinge on complete access to consumer data. Since Apple’s changes, which were mostly felt starting last year with the release of iOS 14.5, there has been “diminished targeting, diminished marketing, and diminished effectiveness,” Wong said in a recent phone interview, “all at the same time, while having double-digit increases in the cost of advertising.” The response to the dramatic changes in performance, particularly on Meta’s apps, has been to try new platforms such as TikTok and buy into connected TV, where there are more ad-supported services and data to track ads, too. Also, “believe it or not catalogs are having an incredible resurgence,” Wong said. “All of our clients are in the mail for both customer retention and new customer acquisition.” “Retention” and “acquisition” have been the specialty of Meta’s apps for years, since they became one of the most efficient ad engines ever built. App advertisers, from mobile game developers to subscription food delivery services, have used Facebook and Instagram ads to unlock growth. Then Apple basically started preventing apps from following consumers who saw ads, to eventual purchases and other activity online. That “conversion” data has been lost, so marketers can’t analyze their ad spend as accurately. The lack of clarity forced marketers to experiment more and not just trust that Meta would deliver results. Apple’s moves are part of a privacy sea change that has made it more difficult to follow any consumer tracks online. Meta has viewed Apple’s control over iPhones, and customers, as a direct threat to its business, and that’s partly why the company set out to develop the metaverse strategy. In that next computing platform, Meta won’t necessarily have to rely on Apple’s iPhones to reach consumers. Meanwhile, TikTok, run by Chinese-owned ByteDance, is eating into Facebook and Instagram, too. These converging forces are having an effect on Meta’s business. In the second quarter, Meta’s ad revenue declined year over year for the first time in more than a decade. Ad sales were down 1% year over year to $28.8 billion. Meta will deliver third-quarter results on Oct. 26. Wong shared stats that showed her brands spent 19% less on Meta apps this year through August, compared to last year. The price of ads on Meta was up about 23% to $16.15, from January to August this year, compared to the same period last year, Wong said. Every advertiser has a different experience depending on the product, region, and marketing tactics they use; so one agency is not necessarily indicative of the whole ad platform. For its part, Meta executives said in the second quarter that the price per ad decreased 14% year over year on average. Wong said that her brands still spend 10 times more on Meta than on TikTok, which is only now developing an ad business. Meta’s “performance five” tips also have an answer for TikTok. Meta is pushing a new ad format called Creators for Direct Response, which recruits talented video-makers to sell products and services. Ad fixes Meta is trying to give performance marketers a path to return to efficient advertising, and some of the answers were given at the recent summit. “We’re actually starting to find some success, where we initially saw some softness when iOS 14 first launched,” said Justin Fredlender, VP of growth and customer acquisition at Ritual, a health supplements brand. Meta is injecting more automation and artificial intelligence into its ad targeting to make up for the loss of hard data signals coming from Apple devices. The idea behind it is that Meta’s machines can do better matching to find consumers, instead of needing granular data signals about the audience. Meta also finds “lookalike” audiences—people who share traits with consumers who proved to be lucrative targets for ad campaigns. For instance, Meta launched a new ad product this year called Advantage+ shopping campaigns, which Ritual has tested, to help improve targeting. Ritual, like many advertisers, also is integrating with Meta’s Conversions API—application programming interface—to send data directly to Meta servers. Brands can send data about sales, shopping cart information, or other website activity to measure the effect of an ad on Facebook. Many apps, including Snapchat, Pinterest and Twitter, are developing conversion APIs to improve their ad platforms after Apple cut off other sources of tracking. There are downsides to all the automation and direct sharing of data. “It’s a little bit of a black box,” Fredlender said, referring to some of Meta’s automation and AI-based ad tools. “We don’t really have a good sense of how it works.” But targeting and conversions are picking up, Fredlender said. “Things are trending up and we’re continuing to find wins that make our investments worth it,” Fredlender said, “and we’re making them more confidently.” Ad Age Next: Streaming Get your tickets for the Nov. 10 event in New York and use the code AA50 for $50 off Register here Reeling in new formats Daniel Pearson, CEO of Bamboo, a paid social agency, said that Meta has also been improving Reels, the video format it launched to compete with TikTok. Now, 20% of activity on Instagram is going to Reels, but they do not have the same advertiser interest or efficiency as feed environments or Stories, Meta execs have said. Meta has been pushing a new Reels-specific ad format, Pearson said, called Creators for Direct Response. “The idea is basically to build more user-generated style content,” Pearson said. Ads made for Reels typically feature a person, up close, explaining a product and service in a looping video, with fast-cut edits and special effects, similar to TikTok creator content. Pearson said that Creators for Direct Response helped one brand increase signups to its app by 68%. The brand was the Providers, which is a financial services app for managing government benefits. One of the upsides of Reels is that ads cost less there than other placements, partly because competition for that space is less intense in the Meta ad auctions, Pearson said. Meanwhile, Bamboo also is implementing the conversion API for most of the advertisers that use the agency. There are concerns about an economic downturn heading into 2023, and Pearson said that could affect marketing strategies. The ads API and other new tactics are becoming crucial to effective advertising on social media. “Clients really have to make sure that they’re profitable on the spend itself, and on a shorter timeline,” Pearson said. “You have to drive the profit on the spend, or else the spend shouldn’t exist.” As for the metaverse, “opportunities are emerging but they’re likely still a ways out,” Ritual’s Fredlender said. “In performance marketing, the devil is in the details.”

How Meta is rebuilding its ad platform to overcome Apple's privacy changes

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