Advertisers Shake Off Facebook's Latest Reach Cuts

Marketers Accept Social Service Has Become Pay To Play

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Facebook CEO Mark Zuckerberg.
Facebook CEO Mark Zuckerberg. Credit: David Paul Morris/Bloomberg

To paraphrase a cliche: The first time Facebook trimmed marketers' organic reach, it was shame on Facebook for not alerting brands that the content bar had been raised. The second time, it was shame on marketers for still posting stuff people thought was spammy. The third time -- last week -- it was whatever.

Late last Friday Facebook announced that next year it will begin cutting the reach of brands' unpaid posts deemed too promotional. It was the latest in a string of moves by the social network to reduce the advertorial cutter in its users' news feeds. But instead of screaming bloody murder like it did two years ago when the first studies showed brands' organic reach was shrinking, this time Madison Avenue's collective reaction was cool.

"No blood pressures raised. Everybody was pretty calm about it," said Peter Fasano, senior VP at [email protected]

360i received a heads-up from Facebook a day or two before the news hit and prepared a memo for clients that explained the change and assured them that the sky wasn't falling. "The reaction was almost blank. There was no surprise, no disappointment, no panic," said 360i VP-Social Matthew Wurst.

"I wasn't surprised. Most clients I've spoken to about it weren't that surprised either," said MEC North America Head of Social Noah Mallin. "They're not looking at organic reach on Facebook as a significant way of reaching people."

The reaction indicates that advertisers finally understand what Facebook struggled to communicate two years ago. There's a long line of content trying to make its way into people's news feeds, so like a nightclub owner, Facebook needed to give its bouncer -- the algorithm that governs what shows up in people's feeds --a VIP list. Brands' promotional posts like "Enter this contest!" or "Buy this product!" are not on that list.

"The motivation behind this is obviously that users have indicated they want to see more stuff from their friends," said Mr. Wurst. "For us as an agency, it reinforced a fundamental principle we've been sharing with our clients for years: Facebook is a tremendous platform for brands to achieve a greater degree of personal relevance with consumers and pages that post less-desirable promotional creative can and should and probably already have seen their organic distribution fall."

"Basically they're moving bad actors out of the mix. Red Bull is still going to thrive, and Viacom is still going to thrive. Striving for shareable content is really the goal, not clickthroughs to how many cars you can sell," Mr. Fasano said. However, thriving today doesn't mean what it used to. "Red Bull, Coca-Cola, any massive [Facebook] page out there -- the engagement numbers are going to be in the single digits," he said.

Earlier this year [email protected] released a study of 106 brand pages that found their average organic reach had dropped from 12.1% in October 2013 to 6.2% in February 2014. For pages with more than 500,000 likes, the average organic reach declined from 4.1% to 2.1%.

As a result, marketers look at Facebook differently they did a few years ago. The social network used to be one of the few places for brands to connect with their customers free of charge. But some brands abused that connection by pushing out overly promotional posts, and now seemingly all brands have to pay for the privilege. Facebook remains a social network, but it's being increasingly treated as a traditional publisher.

"I think marketers are just accepting the fact that Facebook is a place where you pay to play. The whole story of building a community is not operative anymore," said Mr. Mallin. "For building a brand story, you really have to do it with a budget."

That should be great for Facebook's shareholders. The company has already been drastically cutting the number of ads it shows users, which has coincided with a steady incline in the average price per ad. In the third quarter, Facebook's average price per ad jumped by 274% year-over-year while the social network served up 56% fewer ad impressions than a year ago. Now Facebook is giving marketers even more reasons to buy those ads while maintaining that the number of ads will not increase as a result.

That increased competition could send Facebook's ad rates skyrocketing out of the reach of smaller budgeted brands. But Mr. Wurst doesn't think so. "I used to think that Facebook was becoming an impossible place for small businesses or medium-sized brands to compete with large Fortune 100 or Fortune 500 advertisers. But it didn't prove to be the case because [Facebook's] targeting capabilities became so sophisticated so quickly and it proved to be efficient spend," he said.

Mr. Fasano concurred that small- and medium-sized businesses should be okay because their relationships with customers on Facebook are already more personal than transactional. But "it could be an awkward place," he said, for places like fast-food franchisers that roll out individual Facebook pages for each franchise restaurant they own.

Analytics firm Socialbakers recently released stats that showed local Facebook pages receive two to four times the number of fan interactions as global ones. But in light of Facebook's upcoming change, Mr. Fasano wondered how a local franchisee's page is going to differentiate from a brand's global page, especially since it may hurt itself by posting local-only offers.

A Facebook spokeswoman said brands whose fans show interest in more promotional posts like sweepstakes announcements shouldn't be too affected. That's because Facebook's algorithm will consider whether people are clicking on and sharing those promotional posts when determining whether to put it in other people's feeds. But that misses the point of what Facebook is doing with its organic reach changes.

"Something promotional might get a lot of hand-raisers, but it's not something in the long term that's good for the brand," Mr. Mallin said. "Facebook is saying 'You've got to raise the bar creatively and not look at short-term metrics.'"

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