• Eric Seufert discussed Meta’s earnings and the Google-DOJ case.
• Meta’s earnings showed a decrease in revenue but a skyrocketing stock price.
• Seufert discussed the importance of increasing impressions and the corresponding decrease in price, as it crowds out competitors and provides more room to grow.
• He also discussed the four ways to increase ad revenue for an ad platform: increasing ad load, increasing reach, increasing the value generated by ads, and increasing time spent on site.
• Facebook has managed to increase engagement and ad load, and has introduced new ad placements to increase the value generated by ads.
• Increased ad load on Reels is justified, as it had no ads before.
• Facebook has created new ad formats, such as click-to-messaging, which have the potential to convert better than other ad formats.
• AI and machine learning are being used to automate the process of managing campaigns, eliminating human error and inefficiency.
• The black box automation suite, Advantage Plus, is used to test different permutations of audiences and creative to find the right mix.
• The application of AI and machine learning is more compelling from the advertising side than the consumer side.
• Generative AI can be used to create assets and interpret what works and what doesn’t.
• The end game is for Facebook to integrate these tools and do it for the advertiser.
• The duopoly of Google and Facebook is over, as brand advertising is moving onto the web from TV in a meaningful way.
Amazon is the one big exception, and ATT has been an accelerant for their ad business.
• Apple and Amazon are capturing direct response budget that has fled from Facebook.
• Facebook is trying to recapture some of those dollars by improving efficiency and engagement, and taking more of the human element away.
• Facebook reintroduced 28-day click attribution reporting, which is modeled, in order to comply with ATT.
• SKAdNetwork 4.0 is more signal, and the biggest platforms will benefit most from it.
• Apple may be shooting themselves in the foot with ATT, as they benefit from in-app purchases.
• ATT has caused a difficult transition for mobile gaming, but Apple may start providing better measurements and signals to help developers.
• Facebook’s earnings results validate the ATT Recession thesis, with revenue down 4% year-over-year.
• Recent decisions in Europe have been problematic for ad targeting, with Meta not allowed to use a contractual basis to get user agreement for ads, WhatsApp not allowed to use first party data for general analytics and security, and Voodoo Games not allowed to use the IDFV.
• The European Union is not likely to allow companies to offer services on terms they don’t want, and this could lead to decreased monetization in Europe.
• Activists and special interests may prevent the right thing from being done, preventing the use of AI technologies.
• The DOJ’s case against Google is that it used its end-to-end ownership of the ad tech stack to suppress competition and prevent other companies from being able to compete.
• The DOJ’s argument is flawed because it portrays supply as chasing demand, when in reality, it is the other way around.
• The DOJ’s chief harm demonstration is that publishers made more money than they should have, which is the only part in the stack where there is arguably lock-in.
• The counterfactual is not that advertisers would have gotten more margin on their ad spend, but that they would have been starved from incremental conversions if Google had not made this available at all.
• The remedy proposed by the DOJ is to split off the exchange and the publisher tool, which highlights the weakness in the case itself because Google Ads are first and foremost for Google Properties.
• Facebook is building up customer engagement to attract advertisers.
• Google divesting Google Ad Manager and AdX could lead to lower prices for publishers and higher prices for advertisers.
• Google is acting as a market maker, pricing long-tail traffic that would otherwise go unsold.
• Google’s data gives them an advantage in pricing, and they may be keeping the third-party ad business alive for the data rather than the revenue.
• Stricter privacy regulations benefit larger companies with more signal.
• Advertisers choose Google because they have no choice, but if Google had been more transparent about their practices, they may not be in as much trouble.
Published February 2, 2023
Visit Stratechery to read Ben Thompson’s original post An Interview with Eric Seufert About Meta’s Earnings and the Google-DOJ Case
