Today in Digital Marketing - Here is How TikTok Will Die ☠︎

Starting point is 00:00:00 It is Friday, April 26th. Today, ban or no ban, were TikTok's days as the marketer's darling numbered anyway? The world's largest ad agency may be considering breaking up, and getting your AI to explain its recommendations to consumers might boost your sales. I'm Todd Maffin. That's Ahead, today in digital marketing. data breaches and natural disasters. Get customized coverage today starting at $19 per month at zensurance.com. Be protected. Be Zen. It is Friday. That means we're checking in with our Meta Ads correspondent, Andrew Foxwell. Andrew has visibility into $300 million in Meta Ad spend through his Slack community called Foxwell Founders. Big day yesterday, Meta, announcing their Q1 results.

Starting point is 00:01:05 Andrew, what stood out for you? I mean, you know, we kind of had this juxtaposition between the ad business that Meta is running, making, you know, all of the money, essentially. And then we have the, you know, the reality labs and all these other things that are happening, kind of obviously losing a lot of money and even the guidance going up for the amount of money that they're going to spend for this.

Starting point is 00:01:31 And I think it's hard because right now you look and talk to advertisers and, you know, rising CPMs, there's really no ad inventory. It seems like that squeeze has fully come on. We've talked about this before. And it's sort of like, what are they thinking? I think it's an important topic to talk about. So for me, it's kind of like, Zuck said a quote I thought was interesting. He said, I quote, I think it's worth calling out historically, we've seen a lot of volatility in our stock in this phase of our product playbook, where we're investing in scaling a new product, but aren't monetizing it yet. And then he cited reels, stories,

Starting point is 00:02:11 and the transition to mobile. So to me, we know that they feel like this is a real thing in terms of AI and in terms of wearing the Ray-Ban glasses and Oculus and all this. And I don't disagree, but I feel like it's less translatable in a very short time in which they're going to be able to make this into something that you can put advertising on. So I think that the transition to mobile

Starting point is 00:02:41 was like mobile adoption was skyrocketing. Reels was already like something that was just a new ad placement and it wasn't used immediately, but they started putting it in all of the current family of apps. And they're bringing in, you know, AI, obviously, in a lot of different places, you know, there's the AI assistant and things, but it feels like that window is not, I feel like equating those things is bad. And I feel like that window is much longer. And that feels really frustrating, I guess, as an advertiser, because it's like, when are they going to actually understand that the engine that's running them is really not

Starting point is 00:03:17 seeing that this is going to translate in the short term in terms of bringing down ad prices or giving us more places to show ads? Yeah. And you mentioned inventory, of course, being under crunch, not just at Meta, in lots of other places as well. But I wonder, like, is it really in Meta's interest to be opening up inventory? Like, you know, if you're going to add more inventory into threads, for instance, will that not bring the average ad rates down a little bit with increased inventory? And isn't that bad for Meta's business? Like maybe they're playing us in a way we haven't even thought about yet.

Starting point is 00:03:47 It could be certainly that that's the case. It could be that they don't care and they have a certain amount of inventory and that's what they're going to leave it at. I don't think that's true. I don't think that's actually what they want to do. I think you can take an example of like what they did with Reels as a way that they were like, we need to figure this out. And it could be that that was Cheryl's move

Starting point is 00:04:05 and like she's gone now and there isn't the product vision necessarily to see that. But if they did the same playbook, in my opinion, which is what he's saying, like the monetization playbook, they took Reels and they put it everywhere. Meta AI and the things that they're doing with it, I just don't know that they're that impactful at this point, or they're that translatable. And so I think that they're not, I think they want more inventory,

Starting point is 00:04:32 and I think they're trying to get that going. But the adoption, I think, hasn't been necessarily what they've wanted, would be my take. And I worry that a year from now, we're talking about how a lot of people have continued to find challenges on meta. And there isn't necessarily a lot of places to go. There's more businesses closing doors. And we're still talking about how they're bleeding cash out of the reality labs. And there's just not much to show for it in terms of an advertising business. Do you think AI search results will be a placement in the future?

Starting point is 00:05:06 I think that AI search results certainly could be something or essentially AI like informed necessarily like, yeah, yeah. Hey, this is you're looking for this like, oh, by the way, have you seen this shirt? Maybe they would initially just stick an ad like in, in this, where you're searching for things or something like in the assistant. I just don't know that it's, that if the engine of that is that powerful right now. So to me, it's like, what are advertisers to do? Like, what are the things that we can do? And it's almost, it's almost like, I wish I had a magic bullet and we don't. There's, there isn't necessarily something that we can do. There isn't necessarily something that we can do to make it easier. It's the same playbook. It's

Starting point is 00:05:48 better creative. It's trying different audiences. It's trying to adapt where you can to advantage plus shopping campaigns and utilizing the AI that they are within campaign serving and trying to simplify where you can. Those are really the pieces that you have control over right now. But right now it's like, I wish it was, I just wish it was so much different than it was. And I wish we were able to say like, yes, that's where they're going. The adoption of this, of all this stuff they're spending billions of dollars on is actually working. But I just don't see that happening in long-term. I think if you're a long-term investor though, Meta still obviously is attractive. You know, one like Wall Street has

Starting point is 00:06:25 essentially their stock price as price target around 600. So there's room to run in this thing in terms of their opinion, in terms of valuation. And a lot of media, ourselves included, were talking yesterday about how the stock price had kind of crashed on the news of the Q1. But I'm in your Slack community. You and I were chatting earlier today over over DMss and you reminded me that actually Meta stock price is doing really well when you look at it kind of overall. Yeah, it definitely is. And it's on discount now. If you believe in Meta over a 10-year period and you believe, or in a five-year period, that you think they're going to solve the issue that I'm worried about right now. If you feel confident in that and you feel confident in the Zuck being able to do that, then I think it's definitely a good buy. Dollar cost averaging, I think, is what my

Starting point is 00:07:09 financial guy keeps telling me to look into. All right, Andrew, thank you. Thank you. Andrew Foxwell is our meta ads correspondent. He's here every Friday. You can learn more about Andrew's digital ads training at b.link slash Foxwell or his Slack community of senior meta ad buyers at b.link slash founders. Both of those are affiliate links, and you can find those at the bottom of our show notes. You can also watch the full unedited interview. There is a link to it in today's email newsletter, which you can sign up to for free by tapping

Starting point is 00:07:39 the link in the show notes or going to todayindigital.com slash newsletter. So lots of talk in the last 24 hours about reports that TikTok is willing to sell its U.S. operations to another group, but would not sell its discovery algorithm as part of that deal. Reports that TikTok's parent company denies, by the way. Some industry analysts are now weighing in on what that would look like and whether it's even possible. Part of what made TikTok's algorithm better was that it relied more on the actions you took on specific videos, how long you watched, at what point you swiped away, and less on how the other platform's algorithms worked, who you followed, and what accounts you engaged with. Quoting Business Insider, Now that we all kind of know how the algorithm works, if a new owner bought TikTok and wanted to build a new version of the For You page,

Starting point is 00:08:31 perhaps it wouldn't be a completely impossible task. It's kind of those Bon Appetit videos where chefs would try to recreate junk food like Ruffles potato chips. It's a stroke of genius to invent Ruffles in the first place, but if a talented cook already knows what a Ruffle looks like and tastes like, they can do an approximation of it, unquote. The piece points out that even so, this wouldn't be as simple as just hiring a bunch of engineers and throwing their attention behind it. Meta has a million engineers, and Reel's algorithm still isn't nearly as captivating as TikTok's. Part of that is because TikTok is more than an app. It's become a culture with its own in-jokes and slang. Consider Threads and X. Both

Starting point is 00:09:13 are microblogging platforms, but you only need a few seconds on each to understand how different the vibe is between them. And there's something else that could weigh TikTok down in the year ahead that's not related to the algorithm at all. Quoting Business Insider, quote, it's likely that the next year of waiting for a potential sale of TikTok will cause a talent drain and low morale across all parts of the company, including non-technical roles. There are tons of tiny things that make TikTok so fun to use, aside from the next video showing up from your feed. And that means tons of tiny ways that make TikTok so fun to use, aside from the next video showing up from your feed. And that means tons of tiny ways for it to get worse. Selling TikTok without the algorithm, whatever that means, is not ideal, but it might not be the one thing that sends TikTok down a path toward MySpace status.

Starting point is 00:10:00 Unquote. So that's one scenario. Another one apparently being considered, the take our toys and go home approach, quoting Reuters, quote, according to four sources, TikTok owner ByteDance would prefer to shut down its loss making app rather than sell it if the Chinese company exhausts all legal options to fight legislation to ban the platform from app stores in the US, unquote. So what does this mean for marketers? Honestly, probably not much at this point. Although Reels isn't quite as strong in discovery and Shorts isn't as set up in creator compensation, marketers really only care about two things. Can I reach a lot of my potential customers on similar platforms? Yes.

Starting point is 00:10:41 And can I use the same format and production as we did on TikTok? Also yes. And with the war the same format and production as we did on TikTok? Also yes. And with the war chests that both YouTube and Meta seem ready to keep plowing into vertical video, TikTok's days as a standalone unicorn were probably numbered anyway. Do you have business insurance? If not, how would you pay to recover from a cyber attack, fire damage, theft, or a lawsuit?

Starting point is 00:11:09 No business or profession is risk-free. Without insurance, your assets are at risk from major financial losses, data breaches, and natural disasters. Get customized coverage today starting at $19 per month at zensurance.com. Be protected. Be Zen. When selling online using AI tools, your brand's ability to make a personal touch can make all the difference. That's the key finding behind some recent research that found that when AI explains why it recommends a product, customers are more likely to purchase. For instance, an explanation like,

Starting point is 00:11:44 this cream is our most repurchased item can increase customer trust and interest. Researchers conducted four experiments focusing on items like sneakers, shirts, and face creams. Explanations led to about a 15% increase in purchasing likelihood and a stunning 55% more clicks on a see more details link for t-shirts

Starting point is 00:12:08 compared to those that didn't receive any explanation. The rationale is simple. Transparency fosters trust. Most shoppers aren't familiar with how AI really works, and a bit of insight into its logic might help mitigate this mystery, making the technology less daunting and the brand seem more friendly. A couple of caveats. The researchers tested against relatively inexpensive products, so that may not align with what you sell. And they did these experiments via a Chinese survey site, which might not directly translate to other cultures. Still, though, the take-home message for e-commerce businesses is clear. Explain your AI's logic, particularly for functional products. A well-placed, see-why-you-got-this-recommendation button could give you a sales uplift.

Starting point is 00:12:54 If nothing else, it's worth testing. The research was published recently in the Journal of Interactive Marketing. It's called When Post-Talk Explanation Knocks, Consumer Responses to Explainable AI Recommendations. There is growing speculation that the world's largest ad agency, WPP, might soon break up. The group's Q1 revenues were down somewhere between 1 and 5 percent, depending on which accounting model you use, and its market cap is lower than its competitors like Publicis Group or Omnicom. Quoting Digiday, quote, internal speculation, albeit formal, has been rife in recent weeks, with some noting that selling off

Starting point is 00:13:36 specific units to private equity could be an outcome, unquote. Over the last few years, the holding group has worked to try to integrate all its component agencies a little tighter. These smaller sub-agencies came to WPP through acquisitions, and many maintain their own brand and siloed teams. And finally, some other ad platforms reported Q1 results yesterday, so here is a quick lightning round rundown for you. Alphabet reported strong earnings driven by growth in Google's ad revenue, which jumped 10%, and its thriving cloud computing business. Snapchat saw a surge in users and revenue in Q1, with daily active users increasing by 17% year over year, and revenue growing 12% from the same period last year. And Microsoft's Bing ads saw a 14% rise in revenue earned. Don't forget to follow us on social media.

Starting point is 00:14:33 We are on Facebook, Instagram, YouTube, LinkedIn, TikTok, Threads, Mastodon, Blue Sky, Snapchat, and Pinterest. For all of those links, go to todayindigital.com slash social or tap the link in the show notes that'll do it for the week today in digital marketing is produced by engageq digital on the traditional territories of the tsunamic first nation on vancouver island our production coordinator is sarah guild our theme is by mark blevis ad coordination by red circle i'm todd maffin thank you for listening have a restful weekend i will see you on monday

Today in Digital Marketing - Here is How TikTok Will Die ☠︎

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