After Facebook shares dropped $120bn, brands should be nervous
The Facebook-brand relationship
Following missed revenue targets, Facebook shares dropped by 19% on 26th July, representing a record $120bn loss in a day. The results have left brands worldwide in a state of worry, and so they should be, if we’ve learned anything from past events is that brands are typically the ones left to pick up the bill when Facebook can’t deliver for their shareholders.
In 2015, when audience growth plateaued the social platform had to rethink their approach and progressively significant changes were made. Organic reach was virtually eradicated in favour of a paid reach model, while content revenue sharing became increasingly limited.
Earlier this year, drops to a user’s daily time spent on the site resulted in “meaningful social interactions” becoming prioritised posts within the news feed, further demoting brands and publishers.
The issue for many brands is that not only are changes being made, but they are given no warning for any upcoming developments. The past couple of years have seen instant articles, video, now meaningful interaction become the latest points of emphasis, with the majority of brands finding out the same time as the public. They are not partners, just subscribers and the terms are changeable.
So, following these record losses brands are left wondering how much this will end up costing them. While maintaining a presence on Facebook will be important for many to engage with the mass audience, there are numerous strategies to overcome the ever-increasing costs of the service.
1. Establish your own social platform and reclaim audiences
The value of social networks has always been strength in numbers, over 2.23bn users are on Facebook and this has kept brands hooked on the platform. But as organic reach continues to plummet brands must wonder if they’re going to be able to capitalise on this anymore.
To reduce the dependency on these social networks, brands must form their own platforms and progressively reclaim their audiences back. Moving the emphasis from volume to precision and profitability. Social audiences are hugely valuable, Facebook and Twitter generated $20 and $7.5 respectively per user worldwide (ARPU) in 2017, with these numbers predicted to rise the value proposition should be clear for brands.
2. Understand and personalise
Owning and operating a self-owned social platform opens the door to numerous possibilities, particularly in audience understanding, where social data is vital in expanding quality of insights.
Provided the platform has in-built data collection hooks, the opportunity is to build complex audience profiles, based on real-time understanding through analysing behaviour and interests. Brands can not only understand who their audiences are currently, but also due to the quality of the data, predict audience behaviour in the future. This level of understanding is highly valuable and opens up the possibility of lucrative agreements with brands partners.
An important step is to ensure that users are retained so that session time and engagement can increase, allowing the brand to learn increasing amounts about the user. Creating personalised content can be a great way to increase dwell time through a feed that is relevant to the individual user.
This not only allows brands to understand more but further boost partner relations as recent research has indicated a direct correlation between time spent viewing an ad and the number of conversions. Meaning that targeted, personalised content should lead to higher conversions for the advertiser due to the natural increase in dwell time.
3. Create diversified and dynamic business models
As CPMs continue to be squeezed by Facebook and Google, the Duopoly claimed up to 60% of US digital ad spend in 2017, many brands have begun to diversify their business models reducing the dependency on ad revenue.
Models based on subscription, paid content and branded/sponsored content are becoming increasingly prevalent. A survey by the Reuters Institute found a 7% increase in subscriptions for US brands, while 44% of publishers view subscriptions as a vital source of revenue in 2018. The Guardian for the first time attracted more revenue directly from readers than advertisers, while digital publishers using an ad model with a dependency on social traffic, like Vice, Buzzfeed have missed revenue targets, while Mashable sold for a faction of what was predicted in previous years.
However, the opportunity is to be dynamic, through establishing a self-owned social platform and greatly increasing level of audience understanding brands can learn the best time and way to approach each individual user to maximise revenue.
The best example of this in the market currently is The Wall Street Journal who operate a 3-tier paywall based on likelihood to subscribe, dynamically putting up the paywall at different times for each. The potential to apply this strategy in a mobile environment is huge, due to the increased level of data collection within an app, as opposed to the web, offering huge opportunities to significantly improve targeting and conversions.
The costs of social will continue to rise and maintaining a dependency has become a dangerous game for all concerned. The key to future growth will be to reclaim your audiences back from social networks, getting them to come directly to you, opening the door to numerous different benefits, from increased customer understanding, to improved partner relationship and creating a diversified revenue stream.
GLOBALDRUM is a mobile social platform enabling brands to monetise audiences. The Company works with brands who become social entities in their own right, returning control, revenues, and data, enabling a new generation of live social business models on demand synchronised with social networks.
 Facebook and Twitter Report and Accounts 2017
 Reuters Institute, 2018