Facebook cuts down ad costs amidst reducing ad spends

Reportedly, Facebook has initiated discounted ad costs, in response to the declining ad spends due to the pandemic.

The Wall Street Journal reports "Facebook's (ad) rates have declined 25 percent from February to March". While Facebook's family of apps and services are witnessing record-breaking highs in terms of usage, most of these services are not monetized.

On the other hand, the service 'Facebook ads' that contributes a substantial amount to the company's revenue is facing a downturn. Companies that customarily use this service either don't have enough funds to purchase ads; have changed priorities; don't see a productive use of these ads because of reduced consumerism; do not hold relevance; or like most parts of the economy are functioning with minimal capabilities.

Alex Schultz, VP of Analytics and Jay Parikh, VP of Engineering mentioned, "Our business is being adversely affected like so many others around the world. We don't monetize many of the services where we're seeing increased engagement, and we've seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19".

While the principles of correct audience segmentation, competitive bidding strategy, regular optimization and more factors will still apply, Harshil Karia, Founder & MD, Schbang mentions, "We are already seeing a drop in Cost per Unit by close to 40% in some cases".

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While outdoor and print advertising has almost wiped out due to the countrywide lockdown, the only competition that social media platforms currently face is television. Social media had been steadily taking over television, the medium that dominated and remained untouched for several years, but the pandemic has rerouted the course.

With revised content strategies and containment measures, television is observing an upsurge in viewership, and ad spends have not seemed to take a hit as of yet.

The competition between social media platforms is also getting tougher out there. Predominantly, Facebook and Google ran a duopoly in the Indian digital advertising market. Harshil Karia says that the significantly higher support delivered by Google to agencies and brands, coupled with TikTok's arrival has also affected Facebook's business.

He suggests brands should spend and build themselves as the lift on lockdown gets closer, as maximum benefits that advertising can deliver would be reaped during that phase. Although, he adds "Some brands that are essential and are still freely being manufactured and distributed may benefit by making some smart spends at the moment".

The discounted Facebook ad costs may benefit essential services that have been functioning at an increased rate or several non-profit initiatives that are attempting to reach people during the pandemic. Although, it may not be enough to lure the ones that have already pulled out.

In an episode of Samosa Talks, Ashish Bhasin, CEO APAC & Chairman India, Dentsu Aegis Network, mentioned that the production side has been hit badly and thus, brands don’t have the money to spend on advertising and things may start returning to normalcy around Diwali.