As Facebook prioritizes Stories over Newsfeed, will advertisers follow suit?

With disappointing revenues and stagnant user growth reported for its third-quarter, last month, Facebook executives aimed to focus investor attention on the company’s better-than-expected revenue and a shift in its monetization strategy from News Feed to Stories, messaging and video. They also made clear Stories, in particular, as well as Watch and IGTV are not monetizing at the rate of News Feed, yet.

What does this shift mean for advertisers? Are they rethinking their strategies across Facebook properties, including how much they’re willing to spend on testing newer, more experimental ad formats?

Many we spoke with said they don’t approach buying ads through Facebook’s platform as a contest between the company’s various platforms and ad formats, but rather as an opportunity to find innovative ways to tap audiences across its portfolio.

News Feed can still produce. Zvika Goldstein, chief product officer and general manager of social for campaign management platform Kenshoo hasn’t seen marketers making any significant change in how they’re allocating budget to social ads in the past quarter. “Our data shows that the effectiveness of Facebook advertising is still high, particularly from product ads, and marketers still receive enough ROI to counter any negative impressions left by recent news. After all, digital marketing is a results-based industry,” Goldstein said.

“We still see engagement on ads, but we are seeing quality of engagement drop,” Aimclear’s Wenograd warned. “Video watch times are shorter than they were, and because of the glut of ads in a user’s newsfeed, creative focus is (and should be!) moving to the forefront for many advertisers, who used to be able to throw together things with little thought and get results.

Instagram Stories growth signals a major shift. Simon Poulton, senior director of digital intelligence at digital agency Wpromote said that he has “seen significant investment increases for clients” on Instagram.

“The rise of Instagram Stories has created a major shift in the way many individuals use the platform, and the amount of time they are spending on Instagram,” he said. “This has clearly had a massive impact on Snapchat (combined with their own product development challenges) and it’s likely some of the marketers that were considering investing in Snapchat have moved their investments over to Instagram given their existing platform functionality.”

Both Poulton and Phillip Huynh, New York paid social lead, group media director for digital agency 360i, agree that the evolution of the Stories product is just one part of Facebook’s plan to give both advertisers and users more options — and a way to increase average revenue per user (ARPU).

“Users’ rapid adoption of Stories shows that this is an important opportunity to build another key product,” Huynh said. “The challenge here is that this adoption has happened much faster than anticipated, and they’re still developing products. Once those are released and adopted — maybe within 1 to 2 quarters — I would anticipate that ARPU will steadily increase for Facebook in their core NA/EU market, with a possible halo effect in Asia-Pacific.”

Negeen Ghaisar, head of digital strategy at Bigbuzz Marketing Group, predicts that the shift to social media Stories will happen across all platforms. “Social media Stories are an even faster pace platform, and brands will need to be actively and continuously putting out content in a time-sensitive manner.”

Still, she says, it will take some time for advertisers to fully adopt Stories. “Proving ROI on social media stories for some clients, that have more complex products and service offerings is difficult. Agencies have to review and revise how they’re calculating ROI. For smaller and medium businesses, internal content creation takes more time for video content. The more channels that are emphasizing stories for users, the more it will be necessary to spend the time and money to do so,” Ghaisar said.

360i’s Huynh said that channels and placements are evolving and “are ultimately just vehicles for reaching audiences. Savvy marketers think of Facebook as an ecosystem and keep their focus on the audiences, so they shouldn’t need to make any major changes.” He sees social platforms continuing to pivot toward more premium content, as they have in the past, citing Snapchat Discover, Twitter Amplify and Facebook Watch as recent examples.

Goldstein agrees more marketers will see Instagram and Facebook as working in tandem and expects “any cannibalization of budgets from one to the other to prove temporary, and budgets to grow incrementally for both to maximize effectiveness.”

Start getting creative. In the face of declining engagement on trusted News Feed formats, Aimclear’s Wenograd said advertisers are having to look longer-term and with an eye toward creative experiences. “What this means for advertisers is they’ve had to become marketers again, and not just savvy media buyers that exploit a silver bullet short-term. Quality, impactful creative has elevated back to a top priority; a throwback to the Mad Men/Women days of Madison Avenue, where words, images and video are more essential than ever.”

Kenshoo’s Goldstein echoes Wenograd, advising marketers to experiment with their creative in these new formats. “They can invest in creative generation practices that enable adoption of Stories and determine how to leverage the new type of engagement and value they provide,” he said. “Finally, marketers should be thoughtful about their mix of ad types between Facebook and Instagram as the right combination can be very powerful in driving audience engagement and taking campaigns to a whole new level.”

About The Author

Robin Kurzer

Robin Kurzer started her career as a daily newspaper reporter in Milford, Connecticut. She then made her mark on the advertising and marketing world in Chicago at agencies such as Tribal DDB and Razorfish, creating award-winning work for many major brands. For the past seven years, she’s worked as a freelance writer and communications professional across a variety of business sectors.