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Instagram prototypes handing your location history to Facebook
This is sure to exacerbate fears that Facebook will further exploit Instagram now that its founders have resigned. Instagram has been spotted prototyping a new privacy setting that would allow it to share your location history with Facebook. That means your exact GPS coordinates collected by Instagram, even when you’re not using the app, would help Facebook to target you with ads and recommend you relevant content. Worryingly, the Location History sharing setting was defaulted to On in the prototype. The geo-tagged data would appear to users in their Facebook Profile’s Activity Log, which include creepy daily maps of the places you been.
This commingling of data could upset users who want to limit Facebook’s surveillance of their lives. With Facebook installing its former VP of News Feed and close friend of Mark Zuckerberg, Adam Mosseri, as the head of Instagram, some critics have worried that Facebook would attempt to squeeze more value out of Instagram. Tat includes driving referral traffic to the main app via spammy notifications, inserting additional ads, or pulling in more data. Facebook was sued for breaking its promise to European regulators that it would not commingle WhatsApp and Facebook data, leading to an $122 million fine.
A Facebook spokesperson tells TechCrunch that “To confirm, we haven’t introduced updates to our location settings. As you know, we often work on ideas that may evolve over time or ultimately not be tested or released. Instagram does not currently store Location History; we’ll keep people updated with any changes to our location settings in the future.” That effectively confirms Location History sharing is something Instagram has prototyped, and that it’s considering launching but hasn’t yet.
The screenshots come courtesy of mobile researcher and frequent TechCrunch tipster Jane Manchun Wong. Her prior finds like prototypes of Instagram Video Calling and Music Stickers have drawn “no comments” from Instagram but then were officially launched in the following months. That lends credence to the idea that Instagram is serious about Location History.
Located in the Privacy and Security settings, the Location History option “Allows Facebook Products, including Instagram and Messenger, to build and use a history of precise locations received through Location Services on your device.”
A ‘Learn More’ button provides additional info (emphasis mine):
“Location History is a setting that allows Facebook to build a history of precise locations received through Location Services on your device. When Location History is on, Facebook will periodically add your current precise location to your Location History even if you leave the app. You can turn off Location History at any time in your Location Settings on the app. When Location History is turned off, Facebook will stop adding new information to your Location History which you can view in your Location Settings. Facebook may still receive your most recent precise location so that you can, for example, post content that’s tagged with your location. Location History helps you explore what’s around you, get more relevant ads, and helps improve Facebook. Location History must be turned on for some location feature to work on Facebook, including Find Wi-Fi and Nearby Friends.”
As part of a 2011 settlement with the FTC over privacy violations, Facebook agreed that “Material retroactive changes to the audience that can view the information users have previously shared on Facebook” must now be opt-in. But since Location History is never visible to other users and only deals with data Facebook sees, it’s exempt from that agreement and could be quietly added. Most users might never dig deep enough into their privacy settings to turn the opt-out feature off.
Delivering the exact history of where Instagram users went could assist Facebook with targeting them with local ads across its family of apps. If users are found to visit certain businesses, countries, neighborhoods, or schools, Facebook could use that data to infer which products they might want to buy and promote them. It could even show ads for restaurants or shops close to where users spend their days. Just yesterday, we reported that Facebook was testing a redesign of its Nearby Friends feature that replaces the list view of friends’ locations with a map. Pulling in Location History from Instagram could help keep that map up to date.
Sources tell TechCrunch that Instagram founders Kevin Systrom and Mike Krieger left the company following increasing tensions with Zuckerberg about dwindling autonomy of their app within the Facebook corporation. Systrom apparently clashed with Zuckerberg over how Instagram was supposed to contribute to Facebook success, especially as younger users began abandoning the older social network for the newer visual media app. Facebook is under pressure to keep up revenue growth despite it running out of News Feed ad inventory and users switching to Stories that advertisers are still acclimating to. Facebook is in heated competition with Google for last-mile local advertising and will take any advantage it can get.
Instagram has served as a life raft for Facebook’s brand this year amidst an onslaught of scandals including fake news, election interference, social media addiction, and most recently, a security breach that gave hackers the access tokens for 50 million users that could have let them take over their accounts. A survey of 1,153 US adults conducted in March 2018 found that 57 percent of them didn’t know Instagram was owned by Facebook. But if Facebook treats Instagram as a source of data and traffic it can strip mine, the negative perceptions associated with the parent could spill over onto the child.
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What the Facebook Crypto team could build
Facebook is invading the blockchain, but how? Back in May, Facebook formed a cryptocurrency team to explore the possibilities, and today it removed a roadblock to revealing its secret plans.
Former head of Messenger David Marcus, who leads the Facebook Crypto team, today announced he was stepping down from the board of Coinbase, the biggest crypto startup. Marcus was formerly the president of PayPal and helped Facebook Messenger adopt chatbot commerce and peer-to-peer payments, so he was both a natural choice for Coinbase’s board and Facebook’s blockchain skunklabs.
Facebook told CoinDesk this was to avoid the appearance of a conflict of interest, which is exactly what it was. Marcus provided a statement to TechCrunch explaining he was stepping down “because of the new group I’m setting up at Facebook around blockchain,” noting that “Getting to know Brian [Armstrong, CEO of Coinbase], who’s become a friend, and the whole Coinbase leadership team and board has been an immense privilege. I’ve been thoroughly impressed by the talent and execution the team has demonstrated during my tenure, and I wish the team all the success it deserves going forward.”
Now Facebook is cleared to start publicly talking about its plans, though it hasn’t yet. “We are still in the very early stages and we are considering a number of different applications for the blockchain. But we don’t have anything else to share at this time,” a Facebook spokesperson tells me. So what could Facebook be building? I see three main consumer-facing opportunities.
3% off with FaceCoin
Facebook could build a cryptocurrency wallet with its own token that people could use to pay for things with partnered businesses or that they discover through Facebook ads. Because blockchain can make transactions free or very cheap, Facebook and its partners could sidestep the typical credit card processing fees. That would potentially allow Facebook to offer users “3% off purchases made with FaceCoin” or a similar promotion.
Discounts like this could draw users into Facebook’s cryptocurrency feature. It’s well-positioned to run such a scheme thanks to its extensive connections with more than six million advertisers and 65 million businesses that have Facebook Pages. The social network could eat the costs of running the program, passing the transaction fee savings on to the users, while touting partnerships with Facebook Crypto as ways to boost sales for businesses. That could in turn get clients to spend more money on Facebook ads, as the discounts would enhance conversion rates and drive sales.
One thing we know for sure is that Facebook won’t be building on the Stellar protocol. Facebook debunked a Business Insider report saying it was, telling TechCrunch it was not in talks with Stellar or planning to build on it.
P2P and micropayments
Facebook already lets you send friends money through Messenger for free, but only with a connected debit card or PayPal account. Facebook could offer cryptocurrency-based payments between friends to let a wider range of users settle debts for shared dinners or taxis through Messenger. Users might fund their Facebook Crypto wallet once with a payment, possibly with a one-time transaction fee, and then they could send and receive the tokens for free from then on. Blockchain becoming the backbone of peer-to-peer payments could further increase engagement with Messenger for its 1.3 billion users.
Meanwhile, Facebook could also potentially use cryptocurrency to let fans send micropayments to their favorite creators, like video stars and game streamers. Facebook recently debuted its own virtual (not crypto) currency, called Facebook Stars, that users can buy and send to creators, who can then cash them out for one cent each. Facebook takes an undisclosed cut, but gives to the creator the majority of what users spend on Stars.
Facebook could potentially undergird this system with cryptocurrency to alleviate transaction fees and let people tip creators smaller amounts of cash for exclusive content or just to show their appreciation. Facebook started with a minimum of $3 tips at a time so that transaction fees wouldn’t be too high of a percentage of the total purchase. A cryptocurrency solution could let users efficiently tip much smaller amounts, which could lure people toward the behavior. The more money Facebook can deliver to internet celebrities, the more popular ones it can recruit to live on its platform and the more content they’ll produce.
Facebook Stars. Image via KiwiFarm
Facebook Connect for crypto
A top problem in the world of decentralized blockchain apps is how you bring your identity with you. Securely connecting your wallet, blockchain-based virtual goods and biographical info to new dApps can be a laborious process. Users typically have to type in long, complicated alphanumeric keys that are tough to remember and annoying to input. User experience design around identity in the blockchain space lags far behind what we’re used to with mainstream social apps like Facebook Connect, which uses a OAuth single sign-on to let you instantly join apps without creating a new username and password, or filling out a profile and uploading a photo.
Facebook could use its expertise in operating a popular identity platform to ease login to dApps. While the company has faced plenty of privacy issues and attacks on election integrity, Facebook has a strong record of not being traditionally hacked. It hasn’t suffered a massive user data breach like LinkedIn, Twitter and other social networks. Using an overtly centralized identity system to connect with decentralized apps might be counterintuitive, but Facebook could deliver the UX convenience necessary to unlock a new wave of blockchain utility.
For now it’s unclear if Facebook will end up directly competing with Coinbase in the exchange and wallet space, or if it might instead partner with the blockchain mainstay to accelerate its efforts. And on the enterprise engineering side, Facebook could build some decentralized storage infrastructure to cut its massive server bills. But with deep pockets, tons of tech talent and ubiquity amongsts social networkers and businesses, Facebook Crypto’s primary limits are its ambitions and the extent of user trust.
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Facebook taps banks, but for chatbots not purchase data like Google
Backlash swelled this morning after Facebook’s aspirations in financial services were blown out of proportion by a Wall Street Journal report that neglected how the social network already works with banks. Facebook spokesperson Elisabeth Diana tells TechCrunch it’s not asking for credit card transaction data from banks and it’s not interested in building a dedicated banking feature where you could interact with your accounts. It also says its work with banks isn’t to gather data to power ad targeting, or even personalize content such as which Marketplace products you see based on what you buy elsewhere.
Instead, Facebook already lets Citibank customers in Singapore connect their accounts so they can ping their bank’s Messenger chatbot to check their balance, report fraud or get customer service’s help if they’re locked out of their account without having to wait on hold on the phone. That chatbot integration, which has no humans on the other end to limit privacy risks, was announced last year and launched this March. Facebook works with PayPal in more than 40 countries to let users get receipts via Messenger for their purchases.
Expansions of these partnerships to more financial services providers could boost usage of Messenger by increasing its convenience — and make it more of a centralized utility akin to China’s WeChat. But Facebook’s relationships with banks in the current form aren’t likely to produce a steep change in ad targeting power that warrants significant heightening of its earning expectations. The reality of today’s news is out of step with the 3.5 percent share price climb triggered by the WSJ’s report.
“A recent Wall Street Journal story implies incorrectly that we are actively asking financial services companies for financial transaction data – this is not true. Like many online companies with commerce businesses, we partner with banks and credit card companies to offer services like customer chat or account management. Account linking enables people to receive real-time updates in Facebook Messenger where people can keep track of their transaction data like account balances, receipts, and shipping updates,” Diana told TechCrunch. “The idea is that messaging with a bank can be better than waiting on hold over the phone – and it’s completely opt-in. We’re not using this information beyond enabling these types of experiences – not for advertising or anything else. A critical part of these partnerships is keeping people’s information safe and secure.”
Diana says banks and credit card companies have also approached it about potential partnerships, not just the other way around as the WSJ reports. She says any features that come from those talks would be opt-in, rather than happening behind users’ backs. The spokesperson stressed these integrations would only be built if they could be privacy safe. For example, signing up to use the Citibank Messenger chatbot requires two-factor authentication through your phone.
But renewed interest in Facebook’s dealings with banks comes at a time when many are pointing to its poor track record with privacy following the Cambridge Analytica scandal, where people were duped into volunteering the personal info of them and their friends. Facebook hasn’t had a big traditional data breach where data was outright stolen, as has befallen LinkedIn, eBay, Yahoo [part of TechCrunch’s parent company] and others. But users are rightfully reluctant to see Facebook ingest any more of their sensitive data for fear it could leak or be misused.
Facebook has recently cracked down on the use of data brokers that suck in public and purchased data sets for ad targeting. It no longer lets data brokers upload Managed Custom Audience lists of user contact info or power Partner Categories for targeting ads based on interests. It also more adamantly demands that advertisers have the consent of users whose email addresses or phone numbers they upload for Custom Audience targeting, though Facebook does little to verify that consent and advertisers could still buy data sets from brokers and upload them themselves
Facebook’s statement today shows more scruples than Google, which last year struck ad measurement data deals with data brokers that have access to 70 percent of credit and debit card transactions in the U.S. That led to a formal complaint to the FTC from the Electronic Privacy Information Center. [Correction: Google tells us the deals are for ad measurement data, not ad targeting as we originally published. It only learns the aggregate purchase value, not what the items were bought, and the data is encrypted.]
Cambridge Analytica has brought on an overdue era of scrutiny regarding privacy and how internet giants use our data. Practices that were overlooked, accepted as industry standard or seen as just the way business gets done are coming under fire. Internet users aren’t likely to escape ads, and some would rather have those they see be relevant thanks to deep targeting data. But the combination of our offline purchase behavior with our online identities seems to trigger uproar absent from sites using cookies to track our web browsing and buying.
Facebook’s probably better off backing away from anything that involves sensitive data like checking account balances until Cambridge Analytica blows over and it’s proven its newfound sense of responsibility translates into a safer social networking. But at least for now, it’s not slurping up our banking data wholesale.
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Why unskippable Stories ads could revive Facebook
Prepare for the invasion of the unskippables. If the Stories social media slideshow format is the future of mobile TV, it’s going to end up with commercials. Users won’t love them. And done wrong they could pester people away from spending so much time watching what friends do day-to-day. But there’s no way Facebook and its family of apps will keep letting us fast-forward past Stories ads just a split-second after they appear on our screens.
We’re on the cusp of the shift to Stories. Facebook estimates that across social media apps, sharing to Stories will surpass sharing through feeds some time in 2019. One big reason is they don’t take a ton of thought to create. Hold up your phone, shoot a photo or short video and you’ve instantly got immersive, eye-catching, full-screen content. And you never had to think.
Facebook CPO Chris Cox at F8 2018 charts the rise of Stories that will see the format surpass feed sharing in 2019
Unlike text, which requires pre-meditated reflection that can be daunting to some, Stories are point and shoot. They don’t even require a caption. Sure, if you’re witty or artistic you can embellish them with all sorts of commentary and creativity. They can be a way to project your inner monologue over the outside world. But the base level of effort necessary to make a Story is arguably less than sharing a status update. That’s helped Stories rocket to more than 1.3 billion daily users across Facebook’s apps and Snapchat.
The problem, at least for Facebook, is that monetizing the News Feed with status-style ads was a lot more straightforward. Those ads, which have fueled Facebook’s ascent to earning $13 billion in revenue and $5 billion in profit per quarter, were ostensibly old-school banners. Text, tiny photo and a link. Advertisers have grown accustomed to them over 20 years of practice. Even small businesses on a tight budget could make these ads. And it at least took users a second to scroll past them — just long enough to make them occasionally effective at implanting a brand or tempting a click.
Stories, and Stories ads, are fundamentally different. They require big, tantalizing photos at a minimum, or preferably stylish video that lasts five to 15 seconds. That’s a huge upward creative leap for advertisers to make, particularly small businesses that’ll have trouble shooting that polished content themselves. Rather than displaying a splayed out preview of a link, users typically have to swipe up or tap a smaller section of a Story ad to click through.
And Stories are inherently skippable. Users have learned to rapidly tap to progress slide by slide through friends’ Stories, especially when racing through those with too many posts or that come from more distant acquaintances. People are quick with the trigger finger the moment they’re bored, especially if it’s with an ad.
A new type of ad blindness has emerged. Instead of our eyes glazing over as we scroll past, we stare intensely searching for the slightest hint that something isn’t worth our time and should be skipped. A brand name, “sponsored” label, stilted product shot or anything that looks asocial leads us to instantly tap past.
This is why Facebook COO Sheryl Sandberg scared the hell out of investors on the brutal earnings call when she admitted about Stories that, “The question is, will this monetize at the same rate as News Feed? And we honestly don’t know.” It’s a radically new format advertisers will need time to adopt and perfect. Facebook had spent the past year warning that revenue growth would decelerate as it ran out of News Feed ad inventory, but it’d never stressed the danger as what it was: Stories. That contributed to its record-breaking $120 billion share price drop.
The shift from News Feed ads to Stories ads will be a bigger transition than desktop ads to mobile ads for Facebook. Feed ads looked and worked identically, it was just the screen around them changing. Stories ads are an entirely new beast.
Stories ads are a bigger shift than web to mobile
There is one familiar format Stories ads are reminiscent of: television commercials. Before the age of TiVo and DVRs, you had to sit through the commercials to get your next hit of content. I believe the same will eventually be true for Stories, to the tune of billions in revenue for Facebook.
Snapchat is cornered by Facebook’s competition and desperate to avoid missing revenue estimates again. So this week, it rolled out unskippable vertical video ads it actually calls “Commercials” to 100 more advertisers, and they’ll soon be self-serve for buyers. Snap first debuted them in May, though the six-second promos are still only inserted into its longer-form multi-minute premium Shows, not user-generated Stories. A Snap spokesperson said they couldn’t comment on future plans. But I’d expect its stance will inevitably change. Friends’ Stories are interesting enough to compel people to watch through entire ads, so the platform could make us watch.
Snapchat is desperate, and that’s why it’s already working on unskippable ads. If Facebook’s apps like Instagram and WhatsApp were locked in heated battle with Snapchat, I think we’d see more brinkmanship here. Each would hope the other would show unskippable ads first so it could try to steal their pissed-off users.
But Facebook has largely vanquished Snapchat, which has seen user growth sink significantly. Snapchat has 191 million daily users, but Facebook Stories has 150 million, Messenger Stories has 70 million, Instagram Stories has 400 million and WhatsApp Stories (called Status) leads with 450 million. Most people’s friends around the world aren’t posting to Snapchat Stories, so Facebook doesn’t risk pushing users there with overly aggressive ads, except perhaps amongst U.S. teens.
Instagram’s three-slide Stories carousel ads
That’s why I expect we’ll quickly see Facebook start to test unskippable Stories ads. They’ll likely be heavily capped at first, to maybe one to three per day per user. Facebook took a similar approach to slowly rolling out auto-play video News Feed ads back in 2014. And Facebook’s apps will probably only show them after a friend’s story before your next pal’s, in-between rather than as dreaded pre-rolls. Instagram already offers carousel Stories ads with up to three slides instead of one, so users have to tap three times to blow past them.
An Instagram spokesperson told me they had “no plans to share right now” about unskippable ads, and a Facebook spokesperson said “We don’t have any plans to test unskippable stories ads on Facebook or Instagram.” But plans can change. A Snap spokesperson noted that unlike a full 30-second TV spot, Snapchat’s Commercials are up to six seconds, which matches an emerging industry trend for mobile video ads. Budweiser recently made some six-second online ads that it also ran on TV, showing the format’s reuseability that could speed up adoption. For brand advertisers not seeking an on-the-spot purchase, they need time to leave an impression.
By making some Stories ads unskippable, Facebook’s apps could charge more while making them more impactful for advertisers. It would also reduce the creative pressure on businesses because they won’t be forced to make that first split-second so flashy so people don’t fast-forward. Employing unskippable ads could also create an incentive for people to pay for a hypothetical ad-free Facebook Premium subscription in the future.
If Facebook makes the Stories ad format work, it has a bright future that contrasts with the doomsday vibes conjured by its share price plummet. Facebook has more than 5X more (duplicated) Stories users across its apps than its nearest competitor Snapchat. The social giant sees libraries full of Stories created each day waiting to be monetized.
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Facebook loses $120 billion in market cap after awful Q2 earnings
Facebook’s share price fell over 20 percent in after-hours trading today after the company announced its slowest-ever user growth rate and a scary warning that its revenue growth would rapidly decelerate. Before today’s brutal Q2 earnings, Facebook’s share price closed today at $217.50 – a record high — but fell to around $172 after the earnings call. That’s a market cap drop of roughly $123 billion. In two hours, Facebook lost more value than most startups and even public companies are ever worth.
Here’s the full story on Facebook’s disastrous Q2 2018 earnings:
So why did Facebook’s share price sink like a stone? There are five big reasons:
Slowest-Ever User Growth Rate – Facebook’s monthly user count grew just 1.54, compared to 3.14 last quarter. Daily active users grew even slower at 1.44 percent, compared to 3.42 percent last quarter. For reference, 2.18 percent was its previous slowest DAU growth rate back in Q4 2017. Suddenly hitting this wall could limit Facebook’s total user count over the long-run, and its revenue with it. Facebook tried to distract from these facts by announcing a new “family of apps audience” metric of 2.5 billion people using at least one of its apps, which will hide the shift of users from Facebook to Instagram and WhatsApp.
User Count Shrank In Europe, Flat In US & Canada – Facebook saw its first-ever decline in monthly user count in Europe, from 377 million to 376 million. It got stuck at 241 million in the US & Canada after similarly pausing at 239 million in Q4 2017. Those are Facebook’s two most lucrative markets, with it earning $25.91 per user in North America and $8.76 in Europe. If those markets stall, even swift growth in the Rest Of World region where it earns just $1.91 per user won’t save it.
Decelerating Revenue Growth – Facebook’s revenue grew a remarkable 42 percent year-over-year this quarter. But CFO David Wehner warned that metric would decelerate by high single-digit percentage per quarter over the coming quarters. Wehner said a combination of currency headwinds, new privacy controls, and new experiences like Stories will contribute to the deceleration. This news is what caused Facebook’s share price to drop from -7 percent to `-20 percent.
Privacy And Well-Being – Q2 saw the debut of Europe’s GDPR that forced Facebook to change its privacy policies and get users to agree to how it collects data about them. Wehner blamed GDPR for Facebook loss of users in Europe. That law and Facebook’s Cambridge Analytica scandal led the company to have to improve its privacy controls. These could make it tougher for Facebook to target people with ads or show their content to more people.
Meanwhile, Facebook has continued to adopt the “Time Well Spent” philosophy, removing click-bait news and crappy viral videos that lead to passive internet content consumption that studies say is unhealthy. Instead, Facebook is pushing features like Watch Party where users actively interact with each other. Those might not produce as much time on site and subsequent ad views, but CEO Mark Zuckerberg said the changes are “positive and we’re going to continue in this direction.”
The Shift To Stories – Facebook estimates that by in 2019, sharing via ephemeral vertical Stories slideshows will surpass sharing via feeds. The problem is that advertisers may be slower than users to make that shift. “Will this monetize at the same rate as News Feed? We honestly don’t know” COO Sheryl Sandberg said. Stories ads might be full-screen and more immersive, but they don’t show off links to online stores as well, nor are they as well optimized from decades of banner ad experience by the industry.
Luckily, even though Snapchat invented the Stories format, Facebook has far more people using it each day, with 150 million Stories users on Facebook, 70 million on Messenger, 400 million on Instagram, and 450 million on WhatsApp . If Facebook does manage to figure out Stories ads, it could dominate, but it could take years for its advertiser count and ad prices to rise to offset the shift away from feeds.
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Facebook stock tanks from mixed Q2 with slowest-ever growth
Facebook has hit a wall. The social network succumbed to the public backlash over its handling of fake news, privacy, and digital wellbeing to miss some of Wall Street’s estimates, showing mixed results in its Q2 2018 earnings. GDPR, Mark Zuckerberg’s testimony before congress, and more scandals appear to have contributed to Facebook’s weak user growth.
Facebook reached 2.23 billion monthly users, up just 1.54 percent, much slower than Q1’s 3.14 percent around where its growth rate has hovered for years. Facebook earned $13.23 billion in revenue, missing Thomson Reuters consensus estimates of $13.36 billion, but beat with $1.74 EPS compared to an estimated $1.72 EPS.
User Growth Troubles
Daily active users hit 1.47 billion, up an especially low 1.44 percent percent compared to Q1’s 3.42 percent. For comparison, before now Facebook’s slowest quarter-over-quarter daily user growth rate was 2.18 percent in Q4 2017. In an attempt to deflect attention from its weak user growth, Zuckerberg announced on the earnings call that 2.5 billion people use at least one of its apps: Facebook, Instagram, WhatsApp, or Messenger.
The stock market frowned on the slow growth rates, pushing Facebook’s share price down over 21 percent in after-hours trading to around $170 per share. That’s down from $217.50 when the markets closed. Initially the share price dropped 7 percent on news of slow user growth, but then fell much further when Facebook announced revenue growth would slow significantly in upcoming quarters.
The share price descent comes despite Facebook earning $5.106 billion in profit and revenue being up 42 percent year-over-year. Zuckerberg noted in the earnings release that “Our community and business continue to grow quickly”. And while that’s true if you’re looking year-over-year, Q2 could break that trend.
Facebook’s daily and monthly user counts were up 11 percent year-over-year, confirming that the momentum of its business is still overpowering its PR problems when you zoom out. And its DAU to MAU ratio held firm at 66 pecent, indicating that users are still visiting the site often. But the question for today’s earnings call will be whether time spent on the site has decreased significantly, dragging down revenue with it.
One tough spot for Facebook was that it got stuck at 241 million monthly US & Canada users, the same count as last quarter. After failing to grow in that core market in Q4 2017, it appears that Facebook finally has hit saturation at home after 14 years. And in Europe, Facebook lost 1 million users, sinking to 376 million monthlies. That could be sign that GDPR requirements and the annoying terms of service changes it had to get users to agree to deterred some from browsing. In fact, CFO David Wehner said the failure to grow in Europe was “due to the GDPR.”
Decelerating Revenue Growth
Facebook still managed to boost its average revenue per user in all markets, growing from $23.59 to $25.91 in the US & Canada, showing its targeting continues to improve and competition for ads is strong. But the fact that it’s stopped growing at home could weigh heavily on its share price. Facebook will have to continue to invent more ways to squeeze dollars out of its existing users.
The earnings call saw a worrying warning from Wehner, who said that after 42 percent year-over-year revenue growth this quarter, Facebook expected high single-digit drops each quarter to that metric over the next few quarters. “In terms of what’s driving the deceleration, it’s a combination of factors. First of all there’s currency that’s going from a tailwind to a modest headwind. Secondly, we’re going to be focusing on growing new experiences like Stories . . . and that’s going to have a negative impact on revenue growth. Andd we’re giving people who use the service more choice in terms of privacy.”
Looking back, the quarter saw Facebook clamp down on APIs for developers in hopes of preventing another Cambridge Analytica style disaster. Its CEO faced tough days of questioning from congress over the privacy problem, alleged bias against conservatives, and its failure to protect the 2016 presidential election. Facebook has faced tough questioning from reporters about its approach to fake news and election interference. Facebook tried to redirect attention away from its troubles during its F8 conference that saw it announce plans for a dating feature.
But all the problems may be taking a toll on user engagement, leading to the revenue miss. Weak daily and monthly user growth should be a big concern, and will put even more pressure on Instagram to prop up the corporation.
This article has been updated to reflect announcements from the earnings call.
For more recent Facebook news:
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Facebook launches Brand Collabs search engine for sponsoring creators
Facebook wants to help connect brands to creators so they can work out sponsored content and product placement deals, even if it won’t be taking a cut. Confirming our scoop from May, Facebook today launched its Brand Collabs Manager. It’s a search engine that brands can use to browse different web celebrities based on the demographics of their audience and portfolios of their past sponsored content.
Creators hoping to score sponsorship deals will be able to compile a portfolio connected to their Facebook Page that shows off how they can seamlessly work brands into their content. Brands will also be able to find them based on the top countries where they’re popular, and audience characteristics like interests, gender, education, relationship status, life events or home ownership.
Facebook also made a wide range of other creator monetization announcements today:
- Facebook’s Creator app that launched on iOS in November rolled out globally on Android today (this link should be active soon once the app populates across Google Play). The Creator app lets content makers add intros and outros to Live broadcasts, cross-post content to Twitter and Instagram, see a unified inbox of their Facebook and Instagram comments plus Messenger chats, and more ways to connect with fans.
- Ad Breaks, or mid-video commercials, are rolling out to more U.S. creators, starting with those that make longer and original content with loyal fans. Creators keep 55 percent of the ad revenue from the ads.
- Patreon-Style Subscriptions are rolling out to more creators, letting them charge fans $4.99 per month for access to exclusive behind the scenes content plus a badge that highlights that they’re a patron. Facebook also offers microtransaction tipping of video creators through its new virtual currency called Stars.
- Top Fan Badges that highlight a creator’s most engaged fans will now roll out more broadly after a strong initial reaction to tests in March.
- Rights Manager, which lets content owners upload their videos so Facebook can fingerprint them and block others from uploading them, is now available for creators not just publishers.
Facebook also made a big announcement today about the launch of interactive video features and its first set of gameshows built with them. Creators can add quizzes, polls, gamification and more to their videos so users can play along instead of passively viewing. Facebook’s Watch hub for original content is also expanding to a wider range of show formats and creators.
Why Facebook wants sponsored content
Facebook needs the hottest new content from creators if it wants to prevent users’ attention from slipping to YouTube, Netflix, Twitch and elsewhere. But to keep creators loyal, it has to make sure they’re earning money off its platform. The problem is, injecting Ad Breaks that don’t scare off viewers can be difficult, especially on shorter videos.
But Vine proved that six seconds can be enough to convey a subtle marketing message. A startup called Niche rose to arrange deals between creators and brands who wanted a musician to make a song out of the windows and doors of their new Honda car, or a comedian to make a joke referencing Coca-Cola. Twitter eventually acquired Niche for a reported $50 million so it could earn money off Vine without having to insert traditional ads. [Disclosure: My cousin Darren Lachtman was a co-founder of Niche.]
Vine naturally attracted content makers in a way that Facebook has had some trouble with. YouTube’s sizable ad revenue shares, Patreon’s subscriptions and Twitch’s fan tipping are pulling creators away from Facebook.
So rather than immediately try to monetize this sponsored content, Facebook is launching the Brand Collabs Manager to prove to creators that it can get them paid indirectly. Facebook already offered a way for creators to tag their content with disclosure tags about brands they were working with. But now it’s going out of its way to facilitate the deals. Fan subscriptions and tipping come from the same motive: letting creators monetize through their audience rather than the platform itself.
Spinning up these initiatives to be more than third-rate knockoffs of Niche, YouTube, Patreon and Twitch will take some work. But hey, it’s cheaper for Facebook than paying these viral stars out of pocket.
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Facebook demands advertisers have consent for email/phone targeting
Facebook is hoping to avoid another privacy scandal by adding new accountability and transparency requirements for businesses that use its Custom Audiences too to target you with ads based on your email address or phone number. Starting July 2nd, advertisers will have to declare whether contact info uploaded for ad targeting was collected with proper user consent by them, one of their partners or both. Users will be able to see this info if they opt to block future ads from that business.
Companies can only share Custom Audiences info with partners like ad agencies if they’re formally connected through Facebook’s business manager tool. And Facebook will start to show advertisers reminders that they need consent for contact info ad targeting and force all users connected to an ad account to confirm these terms.
The new consent tool launch confirms TechCrunch’s scoop from March that Facebook would crack down on Custom Audiences targeting without consent. Facebook has always technically required consent, but it hasn’t necessarily done much to enforce those rules. That same approach to API rules produced the Cambridge Analytica debacle. Facebook began to safeguard Custom Audiences a few months ago when it blocked third-party data brokers like Datalogix and Acxiom from work with Facebook to upload data sets as Partner Categories that advertisers could target. But that still let businesses just upload the same data themselves.
[Update: Two days after the March announcement, Facebook also announced it would be shutting down Managed Custom Audiences, which let data brokers upload data sets on behalf of marketers. But in doing so, Facebook also formalized its policy that advertisers could still buy these data sets from data brokers and upload them themselves.]
Custom Audiences is one of Facebook’s most valuable revenue generators because it allows businesses to hit up their former customers to buy more. A scandal surrounding the targeting mechanism could be seriously detrimental to the social network’s business in a way that the rest of its recent public image problems haven’t, judging by the recovery of Facebook’s share price.
Since 2012, Facebook has offered Custom Audiences as a way for businesses to upload privacy-safe hashed lists of customer contact info. Facebook matches that against its users’ info to show them the business’ ads, rather than companies having to pay to try to reach those people through demographic targeting. That way, a company that already sold you a car and got your email signup could target you a few years later with ads to trade in and buy a new vehicle. Businesses can also use Facebook’s lookalikes targeting to reach people with similar characteristics to their existing customers.
Now at least Facebook will show this “Original Data Source” field asking who collected the uploaded phone numbers or emails. Users can check out this info if they click the “Why Am I Seeing This Ad?” button in the drop-down. However, Facebook stops short of scanning the lists for suspicious info, such as blocks of contact info that match hacked or purchased data sets.
That means Facebook is trusting advertisers to tell the truth about consent for targeting… despite them having a massive financial incentive to bend or break those rules. Today’s update will give Facebook more plausible deniability in the event of a scandal, and it might deter misuse. But Facebook is stopping short of doing anything to actually prevent non-consensual ad targeting.
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Facebook finally monetizes Marketplace with ads from users and brands
Twenty months after launching its Craigslist competitor, Marketplace, and relentlessly promoting it with placement in the main navigation bar, Facebook will start earning money off its classifieds section. Facebook today begins testing Marketplace ads in the U.S. that let average users pay to “Boost” their listing to more people through the News Feed. While they’re easy for novices, requiring buyers to only set a budget and how long the ads will run, there are no additional targeting options beyond being shown to age 18+ users in nearby ZIP codes.
Meanwhile, yesterday Facebook announced that it’s launching product ads from businesses that appear within Marketplace. After quietly opening in the U.S. in January and testing in Canada in May, Marketplace ads are now official, and can be bought in those two countries plus New Zealand and Australia. Businesses can extend their existing News Feed, video, Instagram, Messenger and other ad campaigns to Marketplace, and more types of objective-based campaigns will open to the classifieds section soon.
Facebook lets brands show ads within Marketplace
The Boost ads could be a big help if you need to rapidly liquidate your furniture before moving out, or if you’re trying to sell something big at a high price, like Marketplace’s new car, housing, jobs and home services offerings. Yet they seem inefficient, since the lack of targeting means your listing for men’s jewelry might show up to women, or your rock climbing gear ads could show up to senior citizens.
Facebook’s new Boost ads let average users pay to show their Marketplace listings to more people
But Facebook does tell me that ads will be auto-optimized for clicks, so when people start to click your ads, Facebook will show them to people of similar demographics. It will also immediately pause your ad campaign if you mark your item as sold. Boost ads get entered in alongside traditional bids in Facebook’s auction system, which then display what it predicts will be the most appealing ads.
“Many Marketplace sellers have told us that they want the ability to show a listing to more people in their local area, especially if they’re trying to sell it quickly,” Facebook product manager Harshit Agarwal tells TechCrunch. “We’re starting to test a simple way for sellers to boost their listings and help them find a buyer.” For comparison, Craigslist doesn’t run any ads, but charges sellers $5 to $10 for certain product listings for cars and brokered apartments.
One interesting quirk is that Facebook says it won’t allow boosting of listings of political products such as a Bernie Sanders for President t-shirt, as its political advertiser verification and labeling system only works with Pages and not individuals right now.
The Boost ads will only appear to a small percentage of U.S. users and Facebook says it’s too early to know if it will roll them out further. But as the company seems bent on swallowing up every other essential part of the internet, anything that makes Marketplace more useful to sellers and lucrative for the tech giant seems like a good bet for an official launch.
Together, the two formats could unlock new revenue streams for Facebook at a time when it’s starting to run out of ad inventory in the News Feed. The company either needs to open new surfaces like Marketplace to ads, or get people and businesses to pay more to fill its dwindling feed space if it wants to keep Wall Street happy.
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Facebook Stories reveals 150M daily viewers and here come ads
After 14 months of silence since launching, Facebook Stories has finally announced a 150 million daily active user count for its Snapchat Stories clone. And now it’s time to earn some money off it. Facebook Stories will start testing its first ads today in the U.S., Mexico and Brazil.
They’re 5- to 15-second video ads users can skip, and while there’s no click-through or call to action now, Facebook plans to add that in the coming months. Advertisers can easily extend their Instagram Stories ads to this new surface, or have Facebook automatically reformat their News Feed ads with color-matched borders and text at the bottom. Facebook also plans to give businesses more metrics on their Stories performance to convince them the feature is worth their ad dollars.
Advertisers can extend their Instagram Stories ads to Facebook Stories (left), or have Facebook reformat their News Feed ads with color-matched image borders and ad copy text shown at the bottom
Facebook has to nail Stories ads to preserve its business, as CPO Chris Cox said this month that Stories sometime next year will surpass feed posts as the top way to share. CEO Mark Zuckerberg warned that Facebook must ensure “that ads are as good in Stories as they are in feeds. If we don’t do this well, then as more sharing shifts to Stories, that could hurt our business.” Despite criticism that the feature is obtrusive and redundant with Instagram Stories, Facebook is proving there’s no retreating from the ephemeral slideshow format. And Snapchat could see ad spend slip over to Facebook, especially since the big blue social network has so much targeting data on us.
The race for storytellers
My first question was how Facebook is defining a daily user for Stories. It’s anyone who watches a Story on Facebook’s app or site. That’s useful, because it means it’s not counting users who simply cross-post their Stories from Instagram or Messenger to Facebook, which would inflate the number. It’s a testament to the coercive power of the top-of-feed Stories design that Instagram pioneered and Facebook brought over, and it’s already testing bigger Stories preview tiles.
For context, here’s a breakdown of Stories daily user counts and total monthly user counts across the top players, ranked by size:
- WhatsApp Status: 450 million daily out of 1.5 billion monthly as of May 2018
- Instagram Stories: 300 million daily out of 800 million monthly as of November 2017
- Snapchat (whole app): 191 million daily as of May 2018, launched
- Facebook Stories: 150 million daily out of 2.2 billion monthly as of May 2018
- Messenger Day/Stories: 70 million daily out of 1.3 billion monthly as of September 2017
Instagram Stories also started showing ads when it hit 150 million users, though that was just five months after launch, while it’s taken Facebook Stories 14 months to get there.
The real opportunity for Facebook’s future engagement growth is bringing the Stories format to the international market that Snapchat has largely neglected for four years and only recently got serious about by re-engineering its Android app. WhatsApp capitalized on Snap’s focus on U.S. teens by surging to become the top Stories product thanks to youth across the globe. And now Facebook is specifically building Stories features for countries like India, such as the new audio posts to help users with non-native language keyboards, and cloud storage so you can privately save photos and videos to Facebook for those without room on their phones.
Facebook Stories lets you shoot 360 photos without a 360 camera with this cool “paint with the lens” interface
Since testing in January 2017 and then launching in March 2017, Facebook has been rapidly iterating on its version of Stories in hopes of making it more unique and apt to its audience. That includes adding cross-posting from its other apps and a desktop interface, advanced shutter formats like Boomerang and new augmented reality features like 3D doodling and real-world QR and image triggers that anchor AR to a location.
Oh, and there’s one bonus unannounced feature we’ve spotted. Facebook Stories can now shoot 360 photos without a 360 camera. It uses a cool interface that shows you where to “paint” your camera over your surroundings, so unlike a panorama where you only get one shot, you can go back and fill in missed spots.
Snap’s beaten; time to monetize
All of Facebook’s efforts seem to be paying off. Snapchat sunk to its slowest daily user growth rate ever, a paltry 2.13 percent last quarter, while the much more saturated Facebook grew a strong 3.42 percent. Snapchat actually shrank in user count during March.
That might have been the signal Facebook needed to start putting ads in its Stories. It’s effectively beaten Snapchat into submission. Without as strong of a competitor, Facebook has more leeway to pollute the Stories user experience with ads. And that comes just as Snapchat is desperate to ramp up ad sales after missing revenue estimates in Q1 and mounting losses of $385 million.
“Ads in stories have added a lot of value for businesses on Instagram, and we believe we can do the same on Facebook,” Facebook product manager Zoheb Hajiyani tells me. “Ensuring that this is a good experience for people using the product will be our top priority.” Facebook has lined up a number of ad test partners it’s not disclosing, but also will be running its own ads for Oculus inside Stories.
With existing Facebook and Instagram advertisers able to easily port their ads over to Facebook Stories, and much greater total reach, they might not go to the trouble of advertising on Snap unless they seek young teens. Stories could in fact be the answer to Facebook’s issue with running out of ad space in the News Feed while it shuts down its sidebar units. Stories could generate the ad inventory needed to keep pushing more marketing into the social network.
Stories were inevitable. First launched by Snapchat in October 2013, it took almost three years for Facebook to wake up to the format as an existential threat to the company. But with the quick success of Instagram’s clone, Facebook has wisely swallowed its pride and pivoted its apps toward this style of visual communication. It was another moment, like the shift to mobile, where Facebook could have faltered. But willingness to admit its mistakes and ruthlessly compete may have won another epoch of social dominance.
For more on Stories, check out our feature piece:
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