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March 20, 2018

Facebook Shutdown? Be Careful What You Wish For

After stunning news broke that over 50 million Facebook users had their data breached and unlawfully harvested, lawmakers are calling into question the future of Facebook Advertising and irate citizens are calling for a total Facebook shutdown.

As a private citizen, you should be outraged. As both a private citizen AND consumer of any goods or service, you should be prepared for {gulp}…higher prices and potential job losses. Let’s break it down.

 

Facebook Shutdown as a Private Citizen

No explanation needed. Just be mad.

 

Facebook Shutdown as a Consumer of Goods and Services

This is where a dose of “Careful What You Wish” will leave a bitter taste. We’ve all been there…inundated with ads everywhere we turn. Your Facebook feed. Instagram (owned by Facebook). Facebook Messenger. Video ads on video ads.  They chase you around the internet. You literally cannot escape them.

“They’re so annoying”

Most won’t disagree. But it’s hard not to notice that those annoying ads are pretty damn close to relating to some aspect of your life or a specific characteristic of who you are as a person.

 

Facebook Ad Revenue

 

The simple reality is Facebook is a marketer’s gold mine. It’s a behemoth compared to Google when it comes to targeting abilities. Facebook Advertising is drowning in user-level data. Every click you’ve made, every post you liked, every petty argument you’ve had in the comment section of some ridiculous meme…Facebook is recording every single touch point and continuously building out the most dynamic profiles of all 2 Billion of its users. And needless to say they sell that data to advertisers in the form of placing relevant ads in front you.

But let’s dive into how the potential demise of Facebook Advertising affects you, the consumer.  Most companies operate in a Cost per Customer or Cost per Lead model in some shape or fashion.  Company A, through their own analytics and data, have established they are willing to pay X amount of dollars for a specific group of customers with identifying characteristics. Invest X amount of dollars into one targeted audience, expect to get X amount of dollars out of them.  Dumbed down, it’s the establishment of marketing contribution margins.

Pay $.75, get a $1 in return. 25% margin.

 

With Facebook Advertising, companies and their products are literally getting delivered two feet from their ideal customer (or whatever unhealthy distance you hold your phone in front of your face).  There’s no wasted marketing spend on trying to find you…Facebook does the heavy lifting.

Now let’s imagine a world with no Facebook Advertising. A Facebook shutdown. Maybe we’re relegated back to more “traditional” advertising.  Back to more radio spots, perhaps a local TV commercial here or there, or {gasp}…newspapers. Instead of paying for exposure to a specific group of potential customers that Company A can expect to purchase, that same company will burn marketing spend on eyes and ears that they know are less likely to engage and make a purchase. In our world, we call that burning impressions. Burning money. Strike a match and just burn it.

Facebook Shutdown?

In the Cost Per Customer world, the $20 it previously cost a company to acquire a customer has now turned into $50/customer.   That aforementioned 25% margin? Poof.  And not only poof, Company A is now forecasted to operate in the red on paper.

How will Company A attempt to remedy? Raise prices. Reduce expenses. And what is typically a company’s largest expense?

Payroll.

So while we have every reason to be outraged (and then some) over this egregious, unethical breach in the trust of our most personal data, a Facebook shutdown along with other similar social media platforms could have some very expensive repercussions for all of us.  Hyperbole? Maybe.

Or maybe not.

 

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