Post-Facebook outage, ad buyers are grappling with out-of-control costs

Buying ads across Facebook and Instagram hasn’t been the same for smaller advertisers since a glitch crippled nearly all of the tech company’s services two weeks ago.

The technical problem was caused by a server configuration change that shut down the Facebook, its Messenger and WhatsApp apps as well as Instagram and Oculus. Not only were billions of users prevented from accessing those services, but some advertisers were also unable to make money from them.

The price of ads across Facebook and Instagram surged immediately following the outage, according to the six ad buyers interviewed for this article, while the ads manager tool used to buy and optimize campaigns slowed down. Two weeks later, smaller ad spenders are still struggling.

“We understand the frustration the March 13th Ads Manager outage may have caused,” said a Facebook spokesperson. “Our team is working hard to investigate the impact on advertisers, including reviewing any refundable cases.”

At worst, the cost-per-thousand of impressions bought by agency Social Outlier sat between $41 (£31.38) and $46 (£35) after the outage; the cost was previously $7 (£5) and $11 (£8). The cost-per-acquisition on ads was four to six times more compared to the price before the glitch, said the agency. For the affected advertisers, which tend to spend no more than $50,000 (£38,272) a month across the social networks, no strategies used by Social Outlier have been able to wrangle the wayward auctions.

Nothing has really stuck, said David Herrmann, co-founder and director of advertising at the agency. It’s hard to gauge how much the situation is costing advertisers prior to the 28-day attribution closing said Herrmann, who did say revenue lost for clients has been as low as $1,000 (£765) to $4,000 (£3,061) and as high as $20,000 (£15,309) depending on size.

It’s a similar predicament for Wonghaus Media, an incubator for brands that also buys ads for them. The business has lost around $60,000 (£45,000) in potential revenue since the day of the outage, said the incubator’s CEO Jason Wong. On average, Wonghaus Media makes between $8,000 (£6,123) and $10,000 (£7,654) a day in revenue across all the media it buys including from Facebook.

Unlike Social Outlier, Wonghaus Media felt the effects of the outage on reach, not CPAs. It’s left the business with the conundrum of having to pay three to four times for CPMs that reach fewer people than they were prior to the outage, said Wong. For now, some client budgets are moving over to other channels in the mix like influencers, native ads, Snapchat and Twitter until the auctions settle.

“We’re not a big advertiser on Facebook, so we don’t have a rep who can help us with queries, and the most we’ve got from the company is an automated response so far,” said Wong. “The key takeaway from the situation is, as great as Facebook is as a platform, it can’t be the end-all for advertisers. You have to look elsewhere.”

The volatility of the auction has left Shopify software technology company Liverecover wary of running ads on Facebook now. “The cost of ads has been extremely inconsistent and got 30-50% more expensive since mid to early first quarter,” said Dennis Hegsted, co-founder of Liverecover.

Part of the problem is rooted in the amount of money spent in the auctions. Ad buyers Social Outlier, for example, have observed that the smaller the ad spend and the more an advertiser is dependent on Facebook to be its primary traffic generator, then the more susceptible they are to the vagaries of the auction. The algorithm effectively works better the more data and subsequent spend it has to work with.

“I would say anything less than $50,000 (£38,272) you’re still playing catch-up, but in all honesty, that’s more of a speculation,” said Hermann. “I’d wager the more you place as Facebook being your sole channel you are still feeling the effects.”

The observation was backed by the ebb and flow of the auctions VaynerMedia has contested over the last two weeks. In the two days after the outage, the media agency’s clients spent between 15-30% less than they did before it happened as a result of either the CPM or conversion rates rising depending on the advertiser.

But after two days, the auctions started to return to normal for VaynerMedia’s ad buyers who work for larger advertisers. “We’ve seen spend return to normal in terms of pacing for our clients, while performance seems to be back where expected it to be pre-outage,” said Morgenstern. “When the auctions were volatile, it was more our direct spend that got affected, rather the brand spend.”

Despite the amount of money the auction has cost in terms of lost revenue, ad buyers aren’t recommending advertisers pull media spend from the platform outright. Instead, they are paying closer eye on the fluctuations in price and performance to ensure they’re still pacing well against metrics. Switching off a channel that has the potential to grow a business at scale that generates noticeable returns isn’t an option most ad buyers can justify, despite the issue.

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