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Facebook warns of targeting limitations, says Checkout will take time

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Facebook warns of targeting limitations, says Checkout will take time 1

Facebook reported another record quarter on Wednesday but warned that privacy regulations will limit ad targeting capabilities and slow the future revenue growth. The company announced $21.1 billion in revenues for the fourth quarter of 2019, a 25% increase year-over-year. Advertising, which continues to account for nearly all of Facebook’s revenue, reached $20.7 billion, also a 25% increase from the fourth quarter of 2018.

The company reported daily active users (DAUs) on the platform reached 1.66 billion – up 9% increase from the fourth quarter of 2018. Likewise, monthly active users (MAUs) grew by 8% year-over-year, reaching 2.5 billion. Facebook doesn’t report separate figures for its other properties, Instagram, WhatsApp, and Messenger, but estimates that approximately 2.3 billion people used at least one of its services on a daily basis in December, and that approximately 2.9 billion people were active on a monthly basis.

Ad revenue hindered by privacy challenges. This was the fourth-consecutive quarter in which Facebook’s ad revenue growth was below 30%. Company executives told investors to expect Facebook’s revenue growth rate in the first quarter of this year to slow down compared to last quarter’s 25% growth year over year. “Factors driving this deceleration include the maturity of our business, as well as the increasing impact from global privacy regulation and other ad targeting related headwinds,” CFO Dave Wehner said on the earnings call. He noted targeting and measurement limitations from browsers limiting third-party signals, the company’s own moves such as the rollout this month of Off Facebook Activity controls and privacy regulations — GDPR, CCPA — are still to come: “[T]he majority of the impact lies in front of us.”

Commerce experiences. “[We] are very focused on commerce ads on Facebook, … the great, great, great majority of activity is commerce ads on Facebook – we had a very strong holiday season,” COO Sheryl Sandberg said. The company plans to continue improving and expanding its Checkout capabilities on Instagram and Facebook for users and businesses, but they will require “full integrations” and will take time, said Sandberg. Facebook expanded Shopping ads to all advertisers globally last quarter, but Sandberg cautioned that it will continue to move slowly in commerce: “… we want to make sure the entire experience is right across the board before we go deeper and go broader.” That means most advertisers will have to keep waiting on initiatives like Checkout to roll out more fully.

Why we care. Commerce is an area where there is a lot of innovation happening to improve enabling better customer experiences and, in turn, campaign outcomes. We can expect to see Facebook continue to invest heavily in this area, however, Sandberg’s comments make clear we should temper our timeline expectations for e-commerce enablement.

Above all, with privacy regulations, browser crackdowns on third-party cookies and heightened scrutiny over data practices, Facebook’s warning of slower ad growth is a signal to digital advertisers of what lies ahead. Beyond Facebook campaigns, advertisers should anticipate substantive changes to and limitations on the levels of targeting and attribution that many have taken for granted.


Facebook 2019 Q4 highlights:

Total quarter revenue: $21.1 billion, a 25% increase YoY
Total full-year revenue: $70.7 billion, a 27% increase YoY
Advertising revenue: $20.7 billion, a 25% increase YoY
Daily active users (DAUs): 1.66 billion, a 9% increase YoY
Monthly active users (MAUs): 2.50 billion, an 8% increase YoY
Facebook total employees: 44,942 as of Dec. 31, 2019, a 26% increase YoY


About The Author

Facebook warns of targeting limitations, says Checkout will take time 2

Taylor Peterson is Third Door Media’s Deputy Editor, managing industry-leading coverage that informs and inspires marketers. Based in New York, Taylor brings marketing expertise grounded in creative production and agency advertising for global brands. Taylor’s editorial focus blends digital marketing and creative strategy with topics like campaign management, emerging formats, and display advertising.





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