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In the wake of Apple’s App Tracking Transparency changes, Meta and the brands that use its advertising tools to power their performance marketing stood to lose the most.
The ability to block Apple's Identifier for Advertisers (IDFA) in the 2021 iOS update diminished attribution capabilities, and in doing so it delivered a direct hit to the audience-building and retargeting that made the advertising engine behind Facebook and Instagram such a powerful machine.
But as the fallout from iOS 14.5 becomes more clear a year later, there are signs that Meta’s position in ecommerce isn’t fading completely. It continues to capture a large portion of spend, and is developing new products that are built for a privacy-first digital advertising market.
This may be the beginning of a new era for Meta advertising, but Facebook and Instagram remain a viable channel for brands to reach consumers, and even one where they can find success.
To be sure, the IDFA changes dealt a blow. On a corporate level, this is reflected in Meta's revenue hit from ATT, which executives forecast to reach $10 billion in 2022. At the same time, there are real signs that the dominance it once held is diminishing. According to Insider Intelligence, the Meta-Google ad duopoly will dip below 50% share for the first time since 2014 to 48.4% in 2022, as Amazon and TikTok gain, Axios reported.
This led to a real shift for ecommerce in 2022. Meta’s advertising capabilities were a linchpin of the direct-to-consumer playbook, and brands that used it have suffered from the signal loss. This year, more brands that vaulted to prominence by selling through their own website and advertising on Meta diversified their advertising to many channels, and rewrote their retail strategies by expanding to Amazon, wholesale and brick-and-mortar channels. The big names to make these changes are Glossier and Peloton, but DTC founders throughout the community have talked about how they are undergoing a new wave of experimentation with a multichannel approach all year.
The timing of all of this is particularly difficult. ATT happened to arrive in a year when the ecommerce growth of the pandemic reset to 2019 levels and inflation cut into discretionary spending, so the advertising shift is coming at the same time as a tougher environment for digital commerce. Meta CEO Mark Zuckerberg spoke to this as he announced Meta layoffs this fall. The trajectory of Meta and ecommerce are linked. That being said, it is not the case that ATT and its effects on Meta advertising were the only reason that brands found tougher sledding in 2022. Demand, a pullback in venture capital and rising customer acquisition costs are also among the reasons.
Yet, in all of this, Meta’s market position hasn’t exactly fallen off a cliff. At the peak of dominance in 2017, it had 20% market share in digital advertising. This year, that share has fallen to just 19.6%, according to Insider Intelligence. In the third quarter, revenue from advertising was $27.2 billion, which is by no means a small business. Meanwhile, ad impressions increased 17% year-over-year across the company's apps.
Going forward, the question is not so much whether it can survive as an advertising behemoth, but whether it can recalibrate for the changed landscape.
One example of how it wants to do so is Advantage+ shopping campaigns, a new ecommerce-focused ad type launched in August that is Meta's largest post-iOS 14.5 release to date. With this product, Meta employed AI to simplify the process of creating ads, and delivering relevant ads to users. Here’s how it describes the product:
In just a few steps, an advertiser sets their business objective, target country, advertising creative, and budget. After that, they let our AI systems do the rest: optimizing to find the right person, with the right message, and at the right time to deliver a strong ROI. By leveraging AI and automation, it helps advertisers get smarter – faster – on which campaigns are driving results.
The results of a recent pilot that were reported by the company shows promise. The summer test with 31 advertisers found that, on average, Advantage+ shopping campaigns improved cost per acquisition (CPA) by 17% and return on ad spend (ROAS) by 32% when compared with a usual campaign.
As a result, the test was expanded from ecommerce and retailers to a wider range of CPG brands and entertainment companies.
On Black Friday-Cyber Monday, brands made Advantage+ a bigger part of their ad spend. Meta reported the following this week:
True Classic made Advantage+ 40% of its total spend for the holiday shopping weekend, and saw 25.6% lift in return-on-ad-spend when compared to its second and third highest existing campaigns.
Hollister made the ad type a majority of its investment on Black Friday-Cyber Monday, and achieved its strongest Facebook and Instagram performance in years.
Wolverine Boots went all-in, with 100% of spend on Advantage+. The result was 55% growth in CPM when compared with the same period last year.
Hydrow, the at-home rowing company, had more than half of its November Meta investment in Advantage+, and found a 55% decrease in cost-per-purchase.
Like many data points shared by companies, these leave us wishing we could learn more. For a deeper look under the hood, AdExchanger has a look at what the product means for ad buyers. For those seeking more about how it all works, Mobile Dev Memo has a solid analysis.
But the point on a high level is that brands are still using Meta advertising, and finding new ways to reach customers through its tools. In the fall, Meta also released Custom Audience, which uses AI to find people who are likely to be interested in a product. It's a new product but performs a function similar to Lookalike Audience, which drove so much spend pre-ATT.
Tools from others in the ecosystem could also help. Shopify, which provided the commerce infrastructure to DTC as Meta provided advertising, earlier this year released its Audiences product. It allows brands to leverage Shopify’s network to create lookalike audiences for use on social advertising properties such as Meta, which in turn holds out the promise of improving targeting. Executives have said early results show promise, even as use is limited for now.
iOS 14.5 changed things, and the shifts we saw this year will still matter going forward. Retail media networks, including not just Amazon but also Walmart, Instacart, DoorDash and retailers from Ulta to Nordstrom, stand to gain in a world where first-party data is even more valuable. Content and commerce will also continue to converge, making shoppable content and CTV more prominent. Tools that help advertisers measure and understand interactions across channels will be critical. Meanwhile, more privacy-oriented changes are likely to be coming. As ATT settles in, the digital ad industry is still preparing for the demise of third-party cookies, even though the sunset date continues to get pushed back.
Through it all, new solutions will be built for this landscape, and this year's releases indicate Meta will be among those creating them. To see what’s working, brands must follow the data for their own campaigns – not the stock price, or even the headlines. After all, Meta has a long history of delivering results, even when it is facing controversy.
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New advertising opportunities are being beta tested for in-store audio and product demos.
Retail media’s fast growth isn’t only limited to increasing spend. The advertising itself is also poised to appear in more places beyond ecommerce marketplaces, and even beyond the web.
The latest example comes from Walmart Connect, which is the retail media arm of the world’s largest retailer.
Walmart shared details on testing that it is completing for in-store retail media. To this point, Walmart Connect has been considered the advertising platform for Walmart’s ecommerce site. But these tests indicate that’s poised to expand.
Stores present a potent opportunity for Walmart. It has 4,700 big box locations around the U.S., and customers returned to them in droves last year. In 2022, 88% of the retailer’s customers visited Walmart stores.
Walmart Connect already has already dipped a toe into in-store advertising, with a TV wall, self-checkout ads and integrated marketing. The new pilots aim to take a step further.
“The next frontier of retail media is in-store experiences, and it’s one we’re excited to chart,” Whitney Cooper, head of omnichannel transformation at Walmart Connect, wrote in a blog post on the new tests. “But it’s still an emerging opportunity for us, as we continue to test what serves customers best and which solutions are scalable to Walmart’s size.”
Here’s a look at the two new offerings currently under beta test:
Walmart suppliers will be able to integrate product demos into campaigns across in-store and digital environments.
Product demos aren’t new to store floors, but Walmart Connect is seeking to give them an update that blends digital and physical experiences.
“Part of our test is how to enhance the omnichannel experience by bridging the physical back to digital: For example, by pairing a demo cart with QR codes that link back to a curated Walmart.com landing page so customers can find inspiration and shop their list all in one spot,” Cooper wrote.
Walmart is currently offering 120 demos at stores each weekend, and plans to scale to 1,000 by the end of 2023.
Walmart Connect will now offer advertising placements on Walmart’s in-store radio network. Suppliers will have the option to purchase ads by region or store, enabling targeting of key markets.
“This is the first time brands will be able to speak directly to Walmart customers through this medium,” Cooper writes. “These ads also create a new upper-funnel touchpoint for brand marketers and out-of-home (OOH) buyers to create awareness, because in-store audio is about connecting with customers wherever they are in the store — they don’t have to pass the brand in the aisle.”
With the tests, we’ll be watching for how this advertising is measured, and whether Walmart Connect is tracking impact across different types of formats, and not just a single campaign.