Will Facebook Inc. Continue Its Takeover Of Advertising In 2018?

Facebook Inc. will continue its takeover of advertising in 2018. This story is a prequel to the keynote speeches I will deliver at marketing and media conferences this year. I will talk about how innovation changes the digital advertising business and creates new opportunities for disruption.

For the last five years, I have been talking and writing so often about the Facebook-Google duopoly. How they are deconstructing the whole media industry. How they are demolishing media owners and publishers. And how they are disintermediating the media agencies.

Disruptions like this go way beyond the media industry. Legacy brands across all industries are failing to capitalize on trends. That’s why they are slipping away every day.

Experts call it the era of Digital Darwinism - the phenomenon in which trends, technologies, consumers, and society evolve faster than established brands can adapt. It’s a fate that also threatens governments, institutions, and all other corporate organizations. Today, tomorrow, and in the unforeseeable future.

Will Facebook's empire keep growing? Or, eventually, fall?

Facebook Inc. Keeps Growing its Empire in MAU's and Money

Also this year, Mark Zuckerberg's empire will still rule the global social media landscape in both monthly active users (MAUs) and money. Although many of us speculate that millennials are turning their backs on social networks, the data tells a different story.

Is it because our linear Mad Men minds tend to forget that Facebook Inc. is much more than the blue social network? With the acquisitions of WhatsApp and Instagram and self-created platforms like Facebook Messenger, emperor Zuckerberg owns four of the world’s largest social media/messaging services.

Facebook alone is used by more than 2 billion people per month, and both WhatsApp and Messenger also passed the billion-user milestone in 2016. Tencent, the Chinese company behind WeChat and Qzone, might also boast a billion users in total, but it still doesn’t come close to matching Facebook’s global footprint. See the new chart provided by Statista:

When it comes to monetizing its platform users, Zuckerberg's platform also leads the way. Where Twitter, LinkedIn, and Snap Inc. are still unable to monetize their users, Facebook has become highly profitable. It has not only slayed traditional media owners, but it's also teaching other social platforms a lesson. So emperor Zuckerberg is entitled to say: Veni, Vidi, Vici. I came, I saw, I conquered.

The pace of the advertising takeover is hard to grasp. Facebook's jump from US$7 billion in 2013 to US$26.9 billion in 2016 is stunning.

Why Will Facebook's Global Advertising Revenues Keep Growing?

Facebook's reach and services make it highly attractive to advertisers. It was the first social platform that let global brands target specific groups based on likes, dislikes, and past behavior. That is why Facebook's social media advertising revenues have grown immensely over the past few years.

In the U.S. alone, social media ad revenue is expected to reach US$23.8 billion this year, with a compound annual growth rate (CAGR) of 7.2%, resulting in a market volume of US$31.5 billion in 2022.

The total global social media advertising revenues might even grow to a staggering US$65 billion in 2022, more than double the size of the U.S. market. See the chart below:

Facebook's Mandatory ARPU and BRICS Strategy

Facebook's strong mobile presence and video strategy have pushed its average revenue per user (ARPU) in the U.S. from US$13.58 in 2012 to US$62.23 by 2016, an increase of 358%. However, the yearly ARPU outside the U.S. is worrying: US$19.40 in Europe in 2016 and in APAC only US$7.29

If it can get its ARPU playbook right, Facebook also needs to win the BRICS markets to keep growing: Brazil, Russia, India, China, and South Africa.

Together, the BRICS markets would let Facebook connect with an additional 3 billion users. The combined GDP of the BRICS markets in billions of US dollars would push Facebook's revenues and profitability through the roof. See the chart:

Zuckerberg tried to win India with a bold move. But his $600 million bid to win the digital streaming rights of IPL - one of the most popular cricket tournaments in India - was turned down.

Star India, the subsidiary of Rupert Murdoch’s 21st Century Fox, paid US$2.6 billion to secure both broadcast and digital rights for IPL.

Does the Facebook Empire Have an Achilles Heel?

The question audiences ask most after my talks? Does the Facebook empire have an Achilles heel? My answer? Every empire eventually falls. And Facebook has several weak spots.

Napoleon was smart, a genius, the cleverest general in the world at the time, but he was not the best systematic thinker and not self-aware enough to realize when he began overstepping. That is the comparison I can make to Zuckerberg, whose ego has grown a lot over the last couple of years.

Facebook is coming off a tough year in which it had to battle fake news and reports that Russian-linked groups attempted to influence the 2016 presidential election with ads on its service.

Next, many consumers complained about Facebook's aggressive increase in spammy timeline ads and the interruption of their social conversations. People began comparing the social network with traditional broadcasters.

Global advertisers had already called Facebook's EdgeRank (and its new algorithms) a dirty trick that suddenly prevented them from connecting with their fans. One day, Zuckerberg decided brands could organically connect to only 6% of their fans. To reach the other 94%, brands now had to pay Facebook. CMO's felt betrayed and were furious about this 'fans on lease’ measure.

Finally, WeChat offers brands in Asia far more mobile commerce and monetization benefits than WhatsApp offers brands in the U.S. and Europe. There's more than ads!

Facebook's lack of footprint in the BRICS markets is a severe weak spot. One that is keeping Zuckerberg awake at night.

So, after a rough year in 2017, Emperor Zuckerberg recently shocked the world by announcing drastic changes to Facebook's News Feed to foster “meaningful interaction” and make Facebook more of a force for good.

All clear signs that Zuckerberg's empire - like Napoleon's - has its Achilles heel. So, despite the growing advertising revenues, Zuckerberg needs to step up his game.

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About the Author

In the spotlights, Igor Beuker is a top marketing innovation keynote speaker and futurist known for his foresight on trends and technologies that impact business, economy, and society. Behind the scenes, a serial entrepreneur with 5 exits and an angel investor in 24 social startups. Board member at next-level media firms, changemaker at Rolling Stone Culture Council, Hollywood sci-fi think tank pioneer, award-winning marketing strategist for Amazon, L’Oréal, Nike, and a seer for Fortune 500s, cities, and countries.