I read these two stories from the Wall Street Journal today, back to back, and I think that is how you should also read them. You may be able to find these in Apple News Plus, but I also recommend checking out your local public library’s website — many will have a way of accessing paywalled newspapers like the Journal.
First, Christopher Mims reports on the impact felt by businesses owners as Facebook makes changes to its advertising attribution in advance of iOS 14.5:
Before, even the smallest business could throw as little as a hundred bucks at a tiny ad campaign on Facebook or Instagram, and get detailed and immediate feedback. Now they will have to spend substantially more — thousands of dollars at least — to show their ads to a larger audience, because the targeting will be less precise, says Christian Lovrecich, founder of PixlFeed Media, an e-commerce marketing agency.
“Even though in the short term this is probably not a great thing for small and medium-size businesses, in the long term it’s probably for the best,” says Solo Stove’s Mr. Merris. He expects innovators to find ways to build “wonderful personalized experiences that generate good return on investment, while getting around some of these hotter topics like data collection.”
There is little proof that greater perceived precision in targeting and attribution leads to lower spending or improved results.
Gilad Edelman, Wired:
Meanwhile, the ability to track users wherever they go tends to shift ad revenue from higher quality sites to less reputable ones. “The way the adtech system works is, it follows the reader from Wired.com all the way down to the cheapest possible place, the basement bottom-feeders on the internet, and will serve you the ads there,” explained Nandini Jammi, a former product marketer and co-founder of Sleeping Giants, which pressures brands not to advertise on sites that promote hate or bigotry. Jammi pointed me to worldlifestyle.com, whose homepage features a random jumble of years-old articles on celebrities, self-help, and cute animals. It’s a content farm: a site designed not for human eyes, but to make money by harvesting ad clicks from bots.
Many small businesses, especially direct-to-consumer, do use behavioral ads to build their customer base. David Heinemeier Hansson told me his company, Basecamp, had success with a Facebook ad campaign in 2017. “Compared to everything else we did online, they were the most effective,” he said. “Targeted advertising works.” (Hansson added that he gave up on Facebook advertising anyway because he finds it objectionable.)
And yet, if behavioral advertising were such a boon to entrepreneurship, you might expect it to have spurred a wave of startup growth. Even more than a decade since the recession, though, both the startup rate and the share of Americans working for small businesses are at historic lows—in large part thanks to the rise of monopolistic companies like Facebook and Google, according to many experts. Microtargeting might help some small enterprises get ahead, but that doesn’t mean it’s a boon overall. As with any business strategy, there are both winners and losers.
Ad tech companies love to put lots of numbers in front of customers because it gives the illusion of accuracy. The truth is that most of the numbers are fake. Ads are still targeted fairly imprecisely despite a wealth of user data — many of the ads I see are inexplicably in French — and they are not revenue goldmines. They are just the new standard and it will take some time to adjust. Merris, the primary individual profiled in Mims’ article, is right. This is going to be difficult for some people and businesses to adapt to, but it is the right thing to do.
Here’s the other Journal article I read, from Jeff Horwitz and Keach Hagey:
Google acknowledged in its responses that it had agreed to make “commercially reasonable efforts” to ensure that Facebook was able to identify 80% of mobile users and 60% of desktop users, excluding users of Apple’s Safari web browser, in ad auctions. The Texas complaint alleges that this activity appears “to allow Facebook to bid and win more often in auctions.”
Google further acknowledged in the filing that Jedi Blue required Facebook to spend $500 million or more in Google’s Ad Manager or AdMob auctions in the fourth year of the agreement, and that Facebook committed to making commercially reasonable efforts to win 10% of the auctions in which it had bids.
In reality, small businesses are handing over huge sums of money to Google and Facebook as they rig the online advertising market and scoop up unfathomable amounts of tracking information. The tracking is real; the targeting is hit-or-miss.