Today’s biggest ad platforms, like Facebook and Google, are powered by user data. This data is made up of things like what people post, purchase, watch, and search for online. Then it’s packaged into highly targeted ad space that advertisers buy, generating billions in profit for the tech companies selling it. But now some drastic changes are happening in the digital ad landscape that present obstacles to this model. More users are taking steps to protect their privacy and data, tech companies are paying attention, and governments are enacting policies to rein in data theft.
With major changes looming, many advertisers are looking for alternatives to Facebook ads. Here we’ll dive into the problems Facebook ads are facing, and some alternatives that advertisers should consider when building out ad strategies.
Facebook’s popularity, and how it enables collection of user data
Facebook has become the second most popular online ad space (second only to Google), thanks to its immense user base (2.9 billion MAU, 3.5 billion across their whole suite of apps), and the mountains of data it collects from those users. And advertisers flock to Facebook because of this user data, which includes things like:
- On-site activity (likes, shares, comments, interactions, searches, friends, groups, etc.)
- Topics of interest (determined by on-site activity)
- Off-site activity gathered via cross-site trackers and cookies
- The content of messages in the Messenger app
- Apps and sites using Facebook login
- Location data (including primary location and location history)
- Payment history (for purchases via Facebook or Marketplace)
- Photo and video uploads
- Off-Facebook activity that other sites opt to share with Facebook (i.e. other online purchases that get reported back to Facebook)
For digital marketers, this info is (supposedly) a goldmine. In 2021, Facebook made $115 billion in advertising revenue—a figure that is still projected to increase for the foreseeable future. But the growth isn’t as healthy as you might think—it’s mainly driven by increasing ad prices.
Increasing costs and decreasing effectiveness of Facebook ads
Advertising on Facebook is becoming more expensive, and less effective.
In 2022, the average click-through rate (CTR) across all industries for Facebook ads was 0.9% (down from about 1.3% in 2020). And while the CTR is decreasing, the cost of advertising is skyrocketing. In 2021, Facebook’s average cost per thousand impressions (CPM) increased by 89% to roughly $11. In 2022, the average CPM was nearly $15.
(This trend isn’t isolated to Facebook, either: as of July 2021, Google and YouTube’s CPM increased by 108% year-over-year, TikTok’s by 92%, and Snapchat’s by 64%.)
Why are ad costs rising while effectiveness drops?
More than 200 million businesses use Facebook’s ad tools to reach customers—and everyone’s competing for attention from the same audience. Because more businesses are engaging in e-commerce, the demand for Facebook ads is oustripping the supply of ad space, leading to rising ad costs. To make things worse, the cost is increasing just as (and partly because) Facebook’s user base is stagnating—or even declining. In Q2 2022, Facebook lost two million MAU for the first time in its history.
Simply put, Facebook ads are getting more expensive because the demand (businesses looking to advertise) is growing, but the inventory (or number of users to target) isn’t keeping pace, or is even shrinking in some quarters. But that’s not all that’s affecting Facebook ads: There are major changes happening for the entire landscape.
Changes to the digital ad landscape
The Facebook ads model, and Web 2.0 advertising in general, face multiple new challenges:
Consumers are taking more steps to protect their privacy
Perhaps the biggest obstacle to the continued dominance of Facebook ads is consumer mistrust. Web 2.0 is characterized by a data model that places corporations before people, enabling Big Tech to collect and sell user data at the expense of individuals. Facebook is one of the key Big Tech players in this model, and has a terrible track record with user privacy and data.
From mood manipulation experiments and widespread data theft, to the infamous Cambridge Analytica case, Facebook has repeatedly abused the trust of its users. As a result, more and more users are taking steps to protect their privacy…and their data. Many are opting out of Facebook’s tracking mechanisms, restricting what data they share and how it can be used, or leaving the platform altogether.
Governments are taking action in support of user privacy
The days of unrestricted data collection are long gone: Governments everywhere are stepping in to enforce new online privacy laws. A slew of antitrust bills aimed at Big Tech companies are changing the way Big Tech operates. In 2019, for example, Facebook was slapped with a $5 billion fine from the American FTC and forced to make sweeping reforms to its privacy policies. And with legislation like Europe’s GDPR and California’s CCPA, governments are helping in the fight against Big Tech’s unchecked collection (and use) of our data.
Big Tech companies are enacting competitive data policies
In response to pressure from users and regulators, Big Tech companies are self-regulating, and adjusting what can and cannot be tracked, and how (or if) that data can be shared. Apple’s recent software updates, for example, are giving users more control over tracking, and the ability to turn off cross-site tracking. (And, when prompted, 95% of users do opt out.) Many of Big Tech’s new data policies limit data sharing, creating “walled gardens” between apps where there was previously seamless communication. Add it all up, and you see a real hit to Facebook’s bottom line: Apple’s 2021 privacy policy updates cost Facebook more than $10 billion in ad revenue.
Even Google—the world’s number one ad platform, and one of the worst data-theft offenders—is taking some limited steps toward eliminating third-party data tracking in Chrome, the world’s number one browser.
But three important notes:
- Big Tech isn’t making these changes willingly.
- They’re doing the bare minimum to look like they’re addressing user demands of privacy.
- In the end, they’re most concerned with their bottom lines. At the same time they’re making some limited privacy improvements, they’re inventing new and more complex ways of tracking (case in point: the move away from cookie-based tracking, and toward browser- or device-level fingerprinting). While their methods change, their philosophy doesn’t.
It’s safe to say Big Tech will respect privacy only when it’s profitable and meets the demands of their users. Meanwhile the entire ad tech landscape is shifting. To survive, advertisers must radically change their practices, because the ad platforms certainly won’t.
What are the best alternatives to Facebook ads?
Let’s explore some ad platforms that have a similar model to Facebook (the Web 2.0 model). These platforms, while still susceptible to many of the same problems as Facebook, are faring a little better.
Twitter has nearly 500 million MAU—significantly less than Facebook, but a number that’s growing. It has a highly engaged audience. And there’s also less competition driving ad costs up on Twitter than Facebook (because it’s not as saturated with advertisers).
Twitter offers brands a variety of advertising options: image ads, video ads, carousel ads, text ads, and moment ads (which are a collection of tweets that, together, exceed Twitter’s character limit). Twitter’s CPM is dependent on campaign dynamics, but is estimated to be approximately $6.50 on average. CTR can reach as high as 2% for ads that include a URL, more than twice what you’d expect to find on Facebook, and with a significantly cheaper CPM.
The only caveat is that you’ll need to have concise, simple, and effective messaging to fit within Twitter’s 280-character limit for ads—an obstacle Facebook advertisers don’t have to worry about.
Note that Twitter uses similar tactics when it comes to collecting user data and offering targeted ad space. Twitter has been hit with its own fines and lawsuits for data mismanagement, and is susceptible to the same types of data regulation challenges as Facebook.
LinkedIn (which is owned by Microsoft) has about 90 million MAU, which makes it a relatively small social media platform. But its user base is made up of business professionals with higher incomes to spend, as well as pages for businesses themselves. Business pages are suited for B2B advertising—making the audience and its intent quite different from most other ad platforms.
LinkedIn also offers brands a variety of ad units to take advantage of: sponsored content, sponsored messaging, text ads, dynamic ads, and lead gen forms. Advertisers will find that LinkedIn’s CPM is far higher than other platforms—estimated to be over $30 on average. This may be for good reason, however, as LinkedIn’s professional demographic, on average, spends twice as much as users from other platforms. The ad spend also might not seem so high when you consider its potential for B2B marketing, which typically costs far more than B2C ads across the board. LinkedIn’s CTR also varies widely based on industry and ad type.
LinkedIn does provide relatively detailed tracking and analytics, also allowing brands to target individual groups of users and monitor how users interact with their ads. Though, once again, this type of data collection is susceptible to the risks and same regulatory limits that Facebook faces.
TikTok
New to the scene, TikTok gained rapid popularity among a younger audience (now predominantly aged 13–30). Its user base was about 1.2 billion MAU in Q4 2021, and reached 1.6 billion by the end of 2022. And its engaging video format has users hooked. One third of people who’ve installed TikTok open it everyday and spend, on average, 1.5 hours a day using it.
With a wide variety of ad formats, TikTok’s average CTR ranges from 1.5% to 16% for certain types of high-profile ads. TikTok’s CPM rates average about $10, which is cheaper than most platforms.
Because of its newness, TikTok is less saturated with advertisers, except for those that are ahead of the social media curve. Its ad revenue in 2021 was about $4.5 billion, and it more than doubled that revenue to $9.4 billion in 2022.
TikTok has also come under scrutiny for its aggressive default data collection policies, including collecting info like the contents of messages, precise device location data, contact lists, calendars, and the contents of hard drives (even external ones). The surveillance economy of Web 2.0 is creepy, and TikTok seems to be pushing this model of data collection to the extreme. It’s also the only major social media or ads platform partly owned by a government entity, which raises questions about its independence—the Chinese government owns a 1% stake in TikTok’s parent company, ByteDance, and holds a seat on the board of directors for one of ByteDance’s main subsidiaries.
The best Web3 alternatives to Facebook ads
Now let’s look at some Web3 ad alternatives that offer more future-proof advertising for a privacy-centric world.
When it comes to marketing and advertising on Web3, brands need to rethink their old strategies. Third-party data isn’t widely available, and users have a real say in how their data gets used. And most of Web3 doesn’t need to integrate ads, because users pay to use the platforms (e.g. they pay a small fee to send or trade crypto, or to buy an NFT in a decentralized game). But there are ad platforms that are beginning to incorporate ethical advertising models into the privacy-conscious world of Web3.
In contrast to Web 2.0 ad platforms that scrape every bit of data from users in order to sell ad space, Web3 advertising is all about trust and consent. It’s about being honest with users, and allowing them to make their own decisions about what types of tracking, cookies, and other things they’ll allow, and how their data can be used.
The two types of “Web3” ad platforms
But before diving in, there’s an important distinction to make between two types of “Web3” ad platforms:
- Those that leverage Web3 technology (like blockchain) to serve ads
- Those that serve ads while prioritizing user privacy and data autonomy (i.e. they’re ideologically aligned with Web3, whether or not they use its underlying technology)
The first type often chooses to serve ads via blockchain technology for its technological benefits. By incorporating blockchain, they can streamline their business, reduce overhead costs, increase transparency, and connect publishers and advertisers directly without intermediaries. But they don’t necessarily take steps to protect user privacy, which is what many users are switching to Web3 for. In a sense, these types of platforms attempt to bring the logic of the Web 2.0 ad model to Web3. They most often optimize for advertiser revenue, and make a lot of the same concessions as Web 2.0 advertisers. For this reason, they may not be as successful with users, or show the same ROI for businesses.
Conversely, the second category of Web3 ad platforms is less about using the technology of Web3 to expand on an existing business model, and more about creating an entirely new model. It’s about giving advertisers access to the privacy-focused audiences of Web3, while still respecting their privacy. This is what’s really promising to advertisers entering the Web3 space.
Brave Ads: private ads for a privacy-first Internet
Brave is uniquely suited for Web3 advertising because its ad model puts privacy first, and fairly compensates users for their participation. Through the privacy-focused Brave browser, users can choose which types of ads they want to see, if any. And when users do opt in, they receive a portion of the ad revenue as compensation for their attention. Brave’s revolutionary new ad ecosystem gives users real autonomy, and respects their privacy whether they opt in or out of receiving ads. Answering users’ call for data autonomy, Brave has amassed 60 million MAU in only five years.
Brave’s ad units include:
- Full-page sponsored images in new tabs in the browser
- Image and text cards in the Brave News feed
- Push notifications
- Search ads in Brave Search
And because you must opt in to view some of these ad units, Brave users are significantly more engaged and more likely to click through on ads. Push notifications, for example, have a $20 CPM, with an exceptional 8% CTR to match.
And Brave users are unique. They’re frontline tech users who care about privacy. They understand (and use) Web3, blockchain, crypto, and NFTs. And they’re largely unreachable anywhere else: They use ad blockers, and they stray away from paid television and most social media.
Brave Ads gives brands a chance to reach tech savvy early adopters, the highly discerning users at the vanguard of demanding a privacy-first Internet.
Advertising in 2022 and beyond: a time to diversify
Although the digital landscape for ads is changing rapidly, things are still in flux. Web browsers still rely on different kinds of cookies, and Web 2.0 social media platforms are still leaps and bounds beyond what’s available as Web3 alternatives. Web3 just doesn’t have the kind of mass adoption that’s needed to support the ad tech industry. Yet.
This means that advertisers looking for optimal strategies in 2022 should diversify their approach to advertising: Use the data that’s available in Web 2.0 platforms, while also preparing for the day those data sources dry up. Advertisers should look for better, safer, higher-performing Web 2.0 alternatives, and also start advertising on Web3 platforms to prepare for the privacy-focused future.
As we continue to shift towards a Web3 future, it will become increasingly important to understand users’ privacy concerns—their use of ad blockers, opting out of ads, and their demands that brands interact on their terms.
Thankfully, connecting with Web3 audiences is just a click away. Visit brave.com/brave-ads/ to get started.
