It’s hard to take the thesis that a company that grossed nearly $118 billion and made nearly $40 billion in profit last fiscal year is in crisis, but perhaps that’s the case with Facebook/Meta.
New privacy features of dominant operating systems and regulatory tightening on the horizon in both Europe and the United States have obliterated half of the company market value (half a trillion dollars) and hit the gears of Facebook/Meta’s money-making machine, targeted advertising.
Small and medium-sized businesses (SMBs), which have long relied on Facebook/Meta to reach their audiences, have been affected as well, dependent as they are on the unparalleled surveillance apparatus built up by the US tech giant. The damage in their ability to target ads has made the service more expensive. In many cases, however, the acquisition cost for SMBs has increased so much that it is no longer worth it.
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Since the push against Facebook/Meta’s business model started, the company has turned to these small merchants as a shield. Harming the ad targeting system, warns Mark Zuckerberg, means harming small and medium-sized businesses all over the world.
When Apple made App Tracking Transparency (ATT) mandatory in early 2021, giving users the unprecedented option to decide whether to share their personal data with apps that had previously collected it without asking, Facebook/Meta launched a campaign starring small businesses, with big ads in major US newspapers. The campaign, unsurprisingly, carried a handful of inaccuracies, as the Harvard Business Review reported.
The Global State of Small Businesses Report, released by Facebook/Meta in September 2021, showed an increase in the percentage of small businesses that go digital, from 81% in February to 88%. In Brazil, 59% said they make a quarter or more of their sales online, and 73% said they use Internet ads, above the global average (60%).
It is easy to hold up the rhetoric against a nearly trillion-dollar big tech company with a questionable history of business ethics, to say the least. Against the local restaurant and the neighborhood hairdresser, no. By putting SMBs at the frontline of its defense, Facebook/Meta tries to shield itself against criticism and, at the same time, place itself as responsible for the success of the SMBs. It is an obvious move to clean up its act.
Facebook/Meta has a point when it says that SMBs depend on its advertising system. Anyone who logs on to Instagram for a few minutes will see the volume and capillarity of businesses advertising on the platform. It turns out that Facebook/Meta only tells half the story.
The other side of the story is that this very important ecosystem now at risk was only made viable by the personal data gobbling up by Facebook/Meta since its early days.
The success of ads “that work” stems from original sin: the unethical collection of personal data that is finally starting to be questioned and fought by regulators and other companies that have less to lose by ending this abusive practice.
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The fact that Facebook/Meta is in trouble largely due to the refusal of most iOS users to share their data makes the oddity of the situation very clear: given the choice, people prefer not to be tracked by companies, so, it will be up to SMBs to adapt – again, as they always do.
A few days ago, Google announced that it will follow a similar path as iOS on Android – perhaps more slowly, as Google also relies on targeted advertising. Either way, one gets the feeling that it is a way of no return. To Facebook/Meta, there will remain the metaverse. Good luck.
(Translated by Carolina Pompeo)
