Let’s fact-check some of the claims being thrown around
for the current social media advertising crisis.
By Susan DeMatei
As 2023 planning kicks into high gear, one question frequently popping up is the viability of Meta (the company that owns Facebook, Instagram, What’s App and Messenger) and Google as advertising platforms.
The scrutiny stems from the fact 2022 has not been kind to the tech sector. The stock market saw seven years of gains erased in 10 months last year. The headlines are brutal, calling Meta a “risk,” a “loser,” or in what CNBC named a “death spiral.” Every other day, it seems, there’s news of another large marketer pulling out of the platform. Meta’s meltdown is shocking but not singular. Google went down 40% last year, Amazon 45% and Snap 80%. Add the absolute insanity with Twitter, and even the boldest marketer is wondering how much budget to attach to social media in 2023.
We must break down the causes of these market shifts to answer those questions and apply them to the wine business.
Just the facts, please.
Keeping politics out of it, let’s fact-check some of the claims being thrown around for the current social media advertising crisis.
It’s the economy’s fault.
When Google, Meta, Amazon and Snap missed their quarterly revenue goals, the response to shareholders was a chorus of “it’s not our fault.” Meta blamed “the uncertain and volatile macroeconomic landscape,” Google called it “the challenging macroclimate” and Snap cited “macro headwinds.” In short, inflation and joblessness are up, consumer confidence and home values are down, and supply channel issues aren’t helping.
Sounds reasonable: when people buy less stuff, there are fewer sales of stuff, meaning fewer advertising dollars for the people who make the stuff.
But are we really buying less? You might be shocked to hear that sometimes the news sensationalizes the truth. If you investigate, it doesn’t appear that we are buying less. U.S. consumer spending increased, and the U.S. GDP grew 2.6% in Q3 2022 and 1.9% in Q4. So while we’re not killing it as a country, we aren’t exactly falling apart, either — at least not enough to cause the apocalyptic tumble we’ve seen this year with Meta, Google and Snap.
In addition, how do you explain other tech companies, such as Apple, beating its earning projections in the same “terrible” market as Google, Meta and Snap?
So we’re not buying the economic argument.
It’s the advertisers’ fault.
Another consistent whimper and whine propagated by news headlines is that advertisers aren’t advertising. This headline may keep you up at night: if Frito-Lay and Budweiser are pulling advertising, shouldn’t we as well?
Let’s start with the foundation, and great generalization, that there are two kinds of advertising: Ads for awareness (we exist) and ads for response (buy this, sign up for this, attend this). If we continue the generalization, these ads are targeted differently. Awareness ads should focus on people who don’t know your brand yet, and response ads should target people who are already aware of your brand or product. You also typically spend more and advertise more frequently to the awareness target. This concept is the basis of the marketing funnel.
Highly visual platforms that regurgitate content back to you based on what you interact with, such as Snapchat, YouTube, Pinterest and TikTok, are better at awareness ads. On the other hand, Facebook and Instagram have always excelled at response ads as they have the most advanced tracking of consumer behaviors. Google does both well, but at a higher cost.
We’re seeing the more prominent clients and budgets with awareness goals shifting budgets to platforms that provide broad coverage better than Meta. In particular, TikTok has taken off like a rocket, and we’ve seen quotes from large advertisers that they’re moving up to 10% to 15% of their Meta budget from Meta to TikTok. TikTok has dethroned Facebook and Instagram as the go-to medium for efficiently reaching a broad range of people.
Awareness advertising used to require extensive and expensive TV shoots and a dedicated media planner to navigate the network’s Nielsen ratings. Now, anyone can make a video with a cell phone, and there is a proliferation of streaming cable services that can be targeted down to your living room and easily understood with tools like MNTN. (Thanks Ryan Reynolds. Leave it to a Canadian.)
However, response ads are easy to make and are typically a smaller part of your budget. Because they’re highly responsive and real-time, they are also the easiest and fastest line items to cut or reduce in a reactionary move if you get cold feet.
In sum, advertising hasn’t stopped. It’s shifted.
It’s Apple’s fault.
One hotly discussed topic this past year has been Apple’s new iOS requirements. This upgrade forced apps like Meta to ask users for permission to track their data. This requirement was supposedly going to be a knockout punch to platforms that cater to response-driven advertisers. No data, no targeting. No targeting, no ads. The Apple requirement must be why Meta is down 36% this year, right?
Nope. This doomsday has not come to pass. After a year of the new iOS, Apple reports only about 16% of users choose to block their data. So Meta ads might be less efficient, costing you roughly 16% more to reach your target audience, but that’s a long way from being a wasted endeavor.
Another reason we know this isn’t the reason for ad revenue falling? Because Google is also down 40% this year, and it has its own data. You’d expect them to be cruising right along with ad sales if data tracking was the issue.
It’s Meta’s fault.
Users are jumping ship. The company is failing.
Not so fast. According to StreetAccount, today’s daily active users of Meta are 1.93 billion vs. 1.95 billion expected by analysts in Q3 of this year. This seemingly slight dip is significant because it’s the first down quarter in the company’s history.
We don’t think this is a strong argument, though. Even with a 36% drop in net income in Q3, Meta generated $6.7 billion in profit and ended the period with more than $40 billion in cash and marketable securities. And user numbers are up about 10% globally and are expected to increase by 3% annually through 2024.
While the press is enjoying its Zuckerberg punching bag, no one suggests that Facebook is going out of business.
And Google is just in the news because they have been the press darling for so long. Even though they missed their earnings, Google’s digital ad revenue grew 2.5%, mostly citing poor ad sales on YouTube. The Motley Fool analyzed the company and noted that the stock decline was an “over-reaction” and still list the company as a “buy.”
What we do think is happening:
A shift in awareness ad dollars. As mentioned above, 2022 has seen a shift in advertising dollars, where Meta and Google are no longer the dynamic duo in the awareness “mass reach” area.
Meta doesn’t care about advertisers. The company is putting all its eggs in the Metaverse basket, with Zuckerberg saying it’s shooting for one billion users and focusing almost all development into making that a new ad platform. (The problem is, there’s very little support or information for companies that can’t employ a development firm on how to get involved.) Regardless, it’s clear that Meta and Twitter are not currently catering to advertisers. They have other agendas at play.
Meta is not courting the new generation. Atlantic Equities reports, “Across the industry, short-form video continues to take a greater proportion of time spent. Primarily driving and benefiting from this trend has been TikTok, with some concern that this was creating a competitive challenge for Meta.”
Facebook struggles with video and has been a follower versus a leader in this space. It openly reports that more users go to Reels, which is a lower profit for the company than its Feeds and Stories. Last year, Facebook internal documents reported its teen users had declined by 19% since 2019, with a projected decline of 45% by 2025.
Twitter, too, is projected to witness a decline in Gen Z users. From 5.3 million this year, Twitter’s Gen Z users will drop to 5.2 million by 2025.
Where are they going? TikTok. This year, TikTok will gain more Gen Z users than Instagram and more total users than Snap by 2023, according to eMarketer.
What does that mean for the wine market?
Instagram, Facebook and Google are still wise advertising buys for the following reasons.
- Meta and Google are still the best platforms available to target response-driven ads — in particular, lead generation (join our list), events (buy tickets) and sales in combination with engaging, brand-supportive non-sales content. Remember, the big advertisers leaving with the big awareness dollars are still doing response ads on Meta. It may cost you a little more or be less efficient, but it’s still the best place to be.
- Meta is the least costly channel to reach a target (outside of emailing or texting.) Any other advertising channel, digital or otherwise, will cost more.
- Meta and Google are immediately responsive, which allows for testing and refinement. Unlike some awareness channels, you can continually tweak your target, image or copy on a Google or Meta ad.
- Video is more time-consuming to produce than a Meta ad, and the consumption rate of videos is manic. TikTok recommends advertisers post one to four times per day! If you’re Coca-Cola and have a TikTok team, that’s great, but not many wineries can afford that volume and frequency of content production.
- Advertising alcohol on TikTok is prohibited. So, there’s that.
- Last time we checked, we aren’t targeting teenagers – or at least we hope not. So when you hear of large groups leaving Meta, know it’s mostly Generation Z in search of dance moves, make-up tutorials or pet antics on other platforms.
So, consider Meta “maturing” for now, and Google having a bad hair day. But stick with it. For 2023, they’re both still strong placements for your ad dollars.
_______________________________________________________________________
Susan DeMatei
Susan DeMatei is the founder of WineGlass Marketing, a full-service direct marketing firm working within the wine industry in Napa, Calif. Now in its 10th year, the agency offers domestic and international clients assistance with strategy and execution. Contact WineGlass Marketing at 707-927-3334 or wineglassmarketing.com
