We’ve stopped what we are doing and creating your personalized BrandZ™ report, which will appear in your inbox soon.

Social networks- Time for tomorrow’s advertising models

Marianne Tournery

Content Strategy Manager, Media Division



Social networks: Time for tomorrow’s advertising models

As Facebook celebrates its 15th anniversary, between record financial results and repeated controversies, what are the challenges facing social networks? How are their business models changing? At the heart of the “Social Media Trends 2019” study, published by Kantar Media this year, the advertising model of social networks seems to oscillate between two contradictory slogans: pivoting or persevering.

An advertising model under threat

The Cambridge Analytica case, the departure of executives, record fines, and account hacking have led to this central question: should Facebook’s business model, based on the use of personal data to target advertising—and for other purposes—evolve? Is this the end of social networks as we know them?

While Facebook is still at the top of the list of most popular social networks, attacks on it have resumed with renewed vigor this year.

Since the General Data Protection Regulation (GDPR) came into force, Facebook has exercised more rigorous control over data sharing and has restricted its targeting criteria. Instagram also limits its available data. This has had a direct impact on some advertising products, including native formats that have not previously been used: cross referencing platform data with advertiser data (Facebook Custom Audiences, Pinterest Audiences, and LinkedIn Matched Audiences), or installing Facebook Pixel, Twitter Pixel, LinkedIn Insight Tag for retargeting operations now requires prior consent from users.

Where now? Finding new growth drivers

Diversification and Innovation: the hunt for growth drivers is on! For several years now, the giants of the social web have been showing a desire to diversify in all directions. And this trend is undoubtedly accelerating: artificial intelligence, IoT, augmented reality, smart speakers, and e-commerce—new initiatives are constantly multiplying and innovative partnerships are offering new touchpoints to brands.

Cross Pollination: despite the difficulties, giants of the social web are thus becoming “powerful technological conglomerates which it is now almost impossible to ignore.” Going far beyond their initial framework, GAFAM (Google, Amazon, Facebook, Apple, Microsoft) are now converging on a whole range of services or technologies that integrate the primary function of social media: connection and exchange between users. The boundaries between disciplines are blurring. For example, while Amazon is developing Spark, its own network reserved for Prime members, Facebook is investing in areas other than the social network itself with its Portal smart speaker, and Instagram is launching into e-commerce with IG Shopping.

Alternative Revenues: Another example is in China, where the BATX business model (Baidu, Alibaba, Tencent and Xiaomi) does not rely on advertising, according to a study by Fabernovel on WeChat. On the Chinese platform, advertising is limited to one or two ads per day. “WeChat benefits from the cloud revenues of its parent company Tencent, but above all it takes a commission on payments made via its WeChat Pay solution, which is becoming more and more the preferred channel for Chinese people to pay,” explains Nicolas Cabanes, analyst at Fabernovel.

Ads, ads, and more ads

Still, in the West, advertising accounts for more than 90% of social media revenues. It must be said that the advertising model is sustainable and that its main players are in good financial health. Most of the growth in digital advertising now comes from social displays, a hyper-growth segment dominated by Facebook. One of the reasons is the decrease in organic reach: since social platforms have changed their algorithms, brand pages are expected to see their reach grow smaller and smaller. Which has led, in turn, to an increase in social advertising budgets. In addition, social giants’ Walled-Garden model and their logged universes have finally emerged strengthened from the GDPR battle and from tomorrow’s e-privacy regulation, while other media must collect their data through cookies.

However, the future might well lie in new creative formats, partnerships and other contextual solutions, which are no longer conditioned solely by the collection of personal data. Engage the user without interrupting him/her from the context in which he/she is located. This is the principle of Pinterest Lenses, which offer the user pins that are related to the environment that artificial intelligence has identified in his photo. Or the Shoppable Snap Ads from Snapchat and Amazon, a kind of shopping Shazam, and the One-Click Shoppable Posts from Instagram. All these initiatives from social platforms demonstrate that advertising on social networks still has a bright future ahead of it.