National brands rein in ad spend growth on Facebook, analysis finds

Dive Brief:

Facebook's ad revenue from national marketers is up 25% between January and October of 2018 compared with the same period a year ago, which is a slower pace than in the past, according to a Standard Media Index (SMI) report shared with Marketing Dive. Facebook ad revenue from national advertisers grew by 41% during the same period from 2016 to 2017.
The company has maintained double-digit year-over-year growth, but the rate has declined during each quarter of the year. Facebook had 35% YoY growth for Q1 2018, 30% for Q2 and 16% for Q3. The overall digital market grew 14% in Q3.
"Facebook's growth from national marketers is slowing, indicating that major brands are concerned with recent events there and are focusing on brand-safe environments," said James Fennessy, SMI CEO, in a statement. "National marketers don't have the same issues with platforms like Roku as we saw their revenues jump by 67% in Q3, albeit from a much smaller base."

Dive Insight:

That Facebook's ad revenue from national advertisers is slowing likely reflects brands' concerns over brand safety and privacy on the platform that stem from the Cambridge Analytica scandal and other safety issues. The SMI report follows a new report from The Washington Post further detailing how Russia may have used the platform and others to spread disinformation during the 2016 presidential election, which could further disrupt advertising on the platform. Recent reports about how Facebook leaders CEO Mark Zuckerberg and COO Sheryl Sandberg have responded to the company's issues this year — including by trying to shift blame — is not helping the platform's relationships with marketers.

While Facebook has rolled out new tools aimed at improving transparency, the SMI report suggests that the company hasn't yet fully regained the trust of advertisers. Ad spending on the platform had mostly bounced back after a slump from March to May 2018, according to a C3 Metrics analysis released in September. However, ad ROI hadn't yet recovered, decreasing from an index value of 2 in April to below 0.5 from May to August. Average Facebook spend was about $140,000 in January 2018 and dropped to under $20,000 in May, and was back up to just over $120,000 in August.

The SMI findings align with Facebook reports that its growth would continue to decelerate into 2018. The social media company reported a 33% increase in revenue for Q3 2018 for a total of $13.73 billion, which fell short of analysts' expectations for revenue to reach $13.77 billion and marked the company's lowest percentage increase in the last six years. To boost ad sales, Facebook plans to grow other areas of the platform, including launching new ad products for Stories and focusing more on video and private messaging.

The number of daily active Facebook users is also slowing. The company reported daily active users for September 2018 totaled 1.49 billion, a 9% YoY increase, a number below the 1.51 billion expected. Consumer satisfaction in social media in general is slipping, and Facebook ranked near the bottom among its competitors, according to a recent American Customer Satisfaction Index's 2018 E-Business Report.