My team at Forrester joins Facebook’s quarterly earnings calls, but not with a financial analyst’s mindset. Instead, we listen for the benefit of our B2C marketing clients. Many of them likely contributed to Facebook’s amazing ad revenue growth of 28% year-over-year. As it seems every quarter lately, markets continue to up their spend with the social giant’s family of apps. Marketers from 140 million businesses (mostly small) once again were unperturbed by scandals, fines, or investigations, giving over almost $4B in revenue more than they did the same quarter last year.

On these calls, we are looking for:

Users: Global Growth But Still No User Composition

  • Facebook showed steady growth in terms of both daily active users (1,623M in Q3, up from 1,587M in Q2) and monthly active users (2,449M in Q3, up from 2,414M in Q2). As expected, growth mostly came from outside the US/Canada and Europe given the audience saturation in these regions. International growth is good for global/expanding brands seeking to use social to further marketing goals such as building awareness and discovery of their products in new markets. Even the US/Canada and Europe saw slight bumps in daily active users and monthly active users after quarters of flat growth. Volume of users enables enviable scale — but Facebook keeps us in the dark about user quality from a marketer’s perspective. Facebook shared that 2.2B people use at least one of its services daily. But we don’t know much about these users: How many of them are 13–18 years old vs. retired vs. high-income earners? (Are they your target?) What are their activities in other channels? (How can you build a holistic, cross-channel campaign?) What is their openness to engaging with brands on social? (Do they even want to engage with your brand here?) Our research indicates serious cracks in the facade of social network engagement. These inputs, key to marketing success on social platforms, remain locked behind the walled garden.

Targeting: Headwinds But No Solutions

  • Facebook shared that users limiting/controlling access to data would be a headwind to targeting opportunities going forward. While user counts suggest that Facebook remains a relevant platform, users are becoming increasingly savvy in their ability to control their data in service of privacy and security. Regulatory and ecosystem action also threaten to restrict data usage. This challenge is not unique to Facebook but should present a concern to marketers who rely and pay for exceptional targeting. Facebook gave no indications how it would solve this challenge or if it was even being worked on. It’s possible Facebook doesn’t care; it already has so much data about its users that any change in future abilities to gather data would have a slow impact. Depending on Facebook’s actions, marketers will have to ask themselves if they are comfortable that the solution respects users’ wishes.

Ad Opportunities And Innovation: Lack Specificity

  • Revelations around new and improved advertising tools were tepid. Facebook lightly covered many innovations across a plethora of value props — anything to keep users on the site — from dating and news to virtual reality, payments, and commerce. More offerings mean more impressions and targetable behaviors — good for marketers. But often it feels like Facebook’s innovation pipeline is a diversified risk portfolio, with Facebook hoping something in its vast treasure chest of burgeoning efforts will take off with the same scale as Facebook and Instagram. Less present was any sharing of significant progress against block-and-tackle advertising formats and tools. The most exciting example presented for Adland was the addition of customizable templates to help advertisers create and share ads for the Stories format. That is helpful, but the challenge we hear most from marketers is their inability to measure and prove social’s worth. Even statements around Instagram shopping lacked specificity. Marketers are left to trust Sheryl Sandberg’s high-level statement, “We introduced our next wave of interactive advertising to help build even stronger connections between people and businesses,” before she moved on to the topic of virtual and augmented reality.

Net Net: Ad Innovation Waits On Needed Privacy And Security Work

It’s not surprising that Facebook didn’t have much time to invest in advertising innovation — it’s been pretty busy trying to address privacy and security and harm prevention. These facets are essential to a healthy user experience and therefore important to marketers, too. We predicted, and continue to predict, that it will be hard for Facebook to simultaneously focus on future ad innovation while it backfills the security and data protection features it should have invested in a long time ago. Even with all the money in the world, the efforts are distinct and even at times contradictory, which fragments leadership focus and resource investment.

Looking Forward: Q4 Holiday Shopping And 2020

Q4 2018 showed Facebook to be a legitimate platform for holiday advertising, and we expect no less this year. Advertisers will spend this year’s budget with rigor as looming regulation and recession darkens future campaign prospects. But heading into 2020, recession hedges will cause ad budget reticence. And the US 2020 campaign year will shade Facebook’s atmosphere from a brand safety perspective (Facebook estimates that political ads will only represent 0.5% of their revenue next year, but Facebook’s stance on political ad inclusion is generating controversy). Toward the end of his contribution to the call, Mark Zuckerberg admitted that this will be a very tough year for the company.

I’m sure the $17B in ad dollars from Q3 makes it just a bit better.