Facebook has amassed billions selling a form of ad tech known as micro-targeting, described by the site’s founder, Mark Zuckerberg, as “relevant.” Companies like Facebook and Google upended traditional marketing with a new system based on massive user data collection. As lucrative as this ad tech has been, the curtain might be closing on the practise, mostly because of tougher privacy rules particularly legislated by the EU.
The EU General Data Protection Regulation (GDPR) is targeting Facebook’s user targeting practises. The regulation comes in the wake of a slew of bad news for Facebook, specifically related to spread of misinformation on the platform, topped by a major data breach. The digital marketing sector is highly dependent on the advertising method popularised by the world’s largest social networking site. What happens to social media marketing if GDPR makes core practises in the field illegal?
Why GDPR is Going After Facebook
Facebook’s ad platform is based on collection of user data. The company says that collecting this data is essential to creating highly “relevant” ads that drive traffic and conversions. It should be noted that Facebook only claims this. The company doesn’t disclose internal data on how effective targeted ads are. Whatever Facebook’s claims are, EU regulators are firing back, ‘not so fast.’
European authorities, and perhaps even the public, are increasingly weary of Facebook’s tactics. In the EU bloc, regulators refer to a marketing “duopoly,” referring to the hold Facebook and Google has on digital marketing. Recent scandals involving fake news and data breaches certainly have done nothing to ease the attitude, particularly for Facebook. Authorities are particularly concerned about how Facebook trades data with third party harvesters.
Regulators are coming down hard on the massive social network. The EU as a whole adopted the GDPR in an effort to crack down on mass-scale privacy violations by companies like Facebook. The social media giant is facing individual country scrutiny as well. The German Federal Cartel Office (yes, it investigates organized crime) even went as far as to say that it is considering banning Facebook altogether.
The GDPR takes aim at Facebook on several fronts. First, it’s concerned about how user data is extracted and used by companies like Facebook. Secondly, the regulators are also tackling what they term as a monopoly (or a duopoly) by Facebook in the digital advertising sector.
The legislation mainly demands that businesses like Facebook be more transparent in its dealings. The company is expected to value individual privacy rights and disclose to users the data it collects from their profiles. Facebook is also expected to be more transparent about its business practises, such as using third-party harvested data and selling it to advertisers.
While, in March 2018, the French Competition Authority published a meaty opinion raising multiple concerns about the online advertising sector — and calling for an overhaul and a rebalancing of transparency obligations to address publisher concerns that dominant platforms aren’t providing access to data about their own content.
Lack of Transparency Hurts Both Consumers and Brands
The GDPR crackdown makes a turning point in social media marketing. It may prompt Facebook to redo their whole strategy. While the regulators are pressing hard on transparency, market research is also shedding doubt on the user targeting tactics Facebook promotes.
A recent major study by the Carnegie Mellon University, reported by US media, suggest that targeted ads are not all that cracked up to be. Targeted ads on platforms like Facebook promise to deliver promotional material to a brand’s ideal audience. The idea behind it is that targeted ads generate more revenue per dollar than regular online ads.
The new research suggests that the effects of targeted ads are not as massive as claimed. While targeted ads do generate revenue, it’s highly marginal, according to the study’s authors. The study might be the first to confirm what many in the industry have long suspected. Reputed social media company professionals are already switching non-targeted forms of online ads that doesn’t involve using harvested user data.
The Better Alternative to Targeted Ads
Case in point: New York Times. The celebrated American newspaper recently stopped using ad exchanges in the EU, mainly to comply with the new rules established by the GDPR. The news giant also got rid of behavioural targeting ads just to be on the safe side.
What happened to the revenue from ads? Surprisingly enough, they increased rather than decreased. It’s just one example showing that ad targeting might just be overblown. What matters instead, experts say, is the strength of a brand.
Businesses may not need to rely on harvested user data on sites like Facebook. There’s also the risk of your brand’s name appearing alongside fake news or hate speech. Instead of risking such a scenario, brands can use social media platforms to do what they were originally supposed to do: engage with customers.
Facebook may be controversial, but it’s still a powerful tool to interact with customers in an authentic manner. Use Facebook and similar social sites to build brand reputation. That should drive ad revenue compared to working with dubious parties that flout privacy laws.