Facebook fallout: Higher prices, more emphasis on creative

The cost of Facebook ads will rise following changes to the newsfeed algorithm, so it behooves advertisers to invest in contextual creative and copy talent.

Facebook fallout: Higher prices, more emphasis on creative

Following the announcement that Facebook has amended its newsfeed algorithm to favour posts from family and friends over those posts from advertisers, social-media planners know one thing for sure: the cost of advertising on Facebook is going to rise, again.

Investors and analysts also met the news with concern, as Facebook's common stock declined 4 percent within hours of the announcement.

Multiple agency account executives who spoke with Campaign Asia-Pacific have confirmed that media plans based on the previous algorithm are being replaced with revised projections on reach and impact. Sources have confirmed that advertisers were informed that the update with significantly impact page reach, referral traffic and video impressions.

"In 2012, Facebook changed the algorithm to hit organic reach for posts," reminded Danish Ayub, CEO of MWM Studioz. "This change, while disguised as a move for the benefit of the user, is just Facebook's move to justify raising the cost of advertising."

Planners also expect the cost of advertising on Facebook will rise, unsurprising since it announced that engagement-baiting posts would be demoted.

This means not only that advertisers will have to spend more per impression but also that they will need to invest in the best creative talent at their agencies in order to create content that is genuinely interesting, well targeted and more thought-out, sources said.

If implemented as promised, the changes signal a great move for users. Advertisers and agencies, on the other hand, will need to consider their approach toward smart creative, copy and campaign targeting in order to continue dominating on the platform.

"We [marketers] need to be clever with our content and understand what resonates with the consumer and why," said Greg Allum, head of social at Jellyfish, told Campaign UK. "More importantly, we all need to become better media planners."

With 88 percent of its advertising revenue coming from mobile, Facebook experienced a 49 percent spike in earnings from last year, from $6.8 billion to $10.1 billion.

"The company was understandably focused on driving user growth over the years, although former Facebook executives have recently described negative impacts on consumers from those efforts," said Brian Wieser, senior research analyst at Pivotal Group in London. "To the extent that those criticisms are valid, action is warranted," he said, adding that time spent by users on Facebook had started to decline prior to this decision.

Facebook will be looking to offset the hit it will take to near-term revenue from advertisers by stoking Instagram's growth, Wieser added. The platform will also be able to use this new approach to focus on higher-paying advertisers, and using more refined targeting methods to satisfy advertiser goals with less inventory.

Publishers may be most affected

In the end though, media owners are likely to be the most affected by this update, commented Allum.

While Facebook's announcement may, on the surface, appear to tackle the issue of the spread of fake news and click-bait, that will ultimately depend on a user's friendship circles. This may, in fact, increase the filter bubble effect as users only see posts shared predominantly by the people they interact with the most.

Publishers, who are already challenged on the platform, may not agree to continue investing their media budgets in Facebook with this change.

However, Allum believes that while publishers will test and learn on other channels, they will ultimately return to Facebook.

"The lure of a captive audience will be too much for them, but they will shift their strategy and concentrate on creating less but bigger and better pieces of content, which in turn will improve the user experience for consumers," he said. "Although brands could see an increase in the cost to advertise as the channel becomes more competitive."

Financial Times chief executive John Ridding told Campaign UK that Facebook's update is not particularly helpful to quality publishers.

"As a long-standing publisher of quality journalism, the FT welcomes moves to recognise and support trusted and reliable news and analysis," Ridding said. "But a sustainable solution to the challenges of the new information ecosystem requires further measures—in particular, a viable subscription model on platforms that enables publishers to build a direct relationship with readers and to manage the terms of access to their content."

If the large majority of new online advertising spend continues to go to the search and social-media platforms, quality content will no longer be a choice or an option, Ridding said. "And that would be the worst outcome for all."

This story combines reporting done in Asia by Babar Khan Javed with segments of an earlier story by Emily Tan of Campaign UK.

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