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Levick Daily. Thoughts. Perspectives. Insights.

Digital

What the Decline of Facebook Means for Their Advertisers

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In a recent study, two Princeton researchers used epidemiological modeling, a means of analyzing the patterns, trends, and effects of disease, to predict the decline of Facebook. John Cannarella and Joshua A. Spechler compared the rise and decline of the social network to the spread of disease in their report, explaining “ideas, like diseases, have been shown to spread infectiously between people before eventually dying out.” Using MySpace as a case study, the authors explain that Facebook has already begun a similar decline. One out of four Facebook users between the ages of 13 and 17 has left the network over the last three years.

Companies advertising on Facebook should pay attention to how the decline in Facebook users, and the network’s efforts to appease them, affects their advertising dollars. In an effort to expand its reach and maintain its base, Facebook has sought out strategic acquisitions that allow users to integrate their favorite sites, apps and games into their Facebook experience. The most discussed is the purchase of the photo-sharing app Instagram. While Facebook is still the most widely used social network in the world, Instagram is the fastest-growing, with a 23% jump in active users over the course of 2013. Facebook experienced a 3% drop during the same period.

To address this decline and appease users, Facebook attempts to improve the user experience with algorithms that personalize the service for each individual. One of the most widely known formulas is the EdgeRank algorithm. EdgeRank orders each post on your news feed according to its importance to you. The more you engage with a certain page, person or status, the higher that page, person or related post will appear on your news feed. This means that you are more than likely not seeing things that you do not already regularly engage with, including ads. For companies hoping to increase engagement on their Facebook pages and websites through the ads, this means they must put up more money for the same return.  If not, content goes unshared and money used to produce this content is wasted. Companies advertising on Facebook can no longer reach a large amount of people organically and paid reach must supplement that loss.

To adjust to these algorithms, businesses need to change their ad and content strategies. Targeting important regions, as well as varying content to include photos and videos will improve the chances of content being seen and ultimately shared by Facebook users. It is harder than ever to attract and keep the attention of the people logging onto Facebook each day.

Facebook should continue to innovate and adapt their service to the constantly changing needs of its users. At the same time, they should not ignore the needs of businesses that pay to display ads on the site. Instead of risking a low return on investment, companies are now pressured to spend more and more money to reach potential consumers. Last year, Facebook reached 1 million advertisers and is the second largest advertiser in the global advertising market, with $7.9 billion in revenues last year, trailing only behind Google.

As more businesses and organizations became willing to spend money on the ads, Facebook made it incredibly difficult for those posts to reach their users organically. Ignite Social Media states that since a December news feed algorithm change, organic reach and organic reach percentage have both declined by 44% on average.

Facebook’s advertisers are accepting this now, but it’s possible that companies may take their ad business elsewhere as other sites and apps, like Tumblr and Instagram, become more ad-friendly. While the Princeton study compared the considerable decline in Facebook users to the spread of disease, it may be the businesses on Facebook that may eventually get sick of the network. 

Peter LaMotte is a Senior Vice President at LEVICK and Chair of the firm’s Digital Communications Practice. He is also a contributing author to LEVICK Daily.

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Peter LaMotte, SVP & Chair, Digital Practice
Senior Vice President & Chair, Digital Communications Practice

Peter LaMotte leads the award-winning digital team at LEVICK, bringing the richest, most diverse digital talent and resources to bear on behalf of firm clients worldwide. A proven digital marketing and strategy leader, Mr. LaMotte is well-known...