Mark Zuckerberg, chief executive officer of Meta Platforms Inc., left, arrives at federal court in San Jose, California, US, on Tuesday, Dec. 20, 2022.
David Paul Morris | Bloomberg | Getty Images
For Matthew Hassett’s smart alarm clock company Loftie, the 2022 holiday shopping rush was the busiest in its five-year history despite a lackluster U.S. economy and persistent concerns of a recession.
Hassett, who’s based in New York, attributes the boon to one key decision. He reallocated his marketing budget, decreasing spending on Facebook and, for the first time during a holiday season, committing ad dollars to Amazon.
“So many people start their shopping on Amazon,” Hassett said in an interview. “I do personally for most things. So, we have to be there.”
Loftie is representative of a larger trend taking place in retail that’s having major ripples on Madison Avenue and Wall Street. Amazon’s increased advertising offerings for the millions of brands that sell on the site coupled with Facebook’s diminished targeting capabilities that resulted from Apple’s privacy changes have produced a significant realignment in the digital ad market.
Until a year ago, Amazon didn’t even disclose the size of its advertising business, leaving analysts and investors to guess how much the company was making in allowing sellers and brands to promote their wares on the site and apps. Now, the company’s ad division is a $38 billion annual business, and last week reported 19% year-over-year growth in the fourth quarter to $11.6 billion.
Facebook-parent Meta, meanwhile reported a 4% annual decline in revenue for the quarter to $32.2 billion, shrinking for a third consecutive period. Google has been less impacted by Apple’s iOS update, but the ad business is still being hit by the economic slowdown. Parent company Alphabet posted growth of 1% to $76 billion.
Amazon has catapulted to third in the global digital ad market, with 7.3% share, according to Insider Intelligence. Even as it takes share from Google and Facebook, it’s still well behind the two market leaders, which control 28.8% and 20.5%, respectively, of the industry. The Facebook figure includes Instagram.
Loftie continues to spend more money on Facebook than Amazon, but the equation has changed dramatically. In the days surrounding Black Friday in November, he allocated 10% of his marketing budget to Amazon, up from zero the year before. Facebook and Instagram fell to 40% of his budget from 71%. The rest of the money he pulled out of Meta went to Google, as he increased spending there from 29% over the holidays in 2021 to 50% last year.
Hassett said Facebook ads simply don’t work as well anymore, after the iOS update in 2021 began forcing app developers to ask users if they wanted to be tracked. With more consumers opting out of app tracking, the pool of potential customers has been “hollowed out and so we can no longer reliably target people,” Hassett said.
“Facebook has to serve the audience to a bigger pool of people in order to find the same people you’re finding before, and that’s just more expensive,” he said. “You have to pay a lot more than you did a year ago, and a lot of that is due to Apple’s privacy changes.”
Meta finance chief Susan Li told analysts on last week’s earnings call that growth in the company’s biggest verticals, online commerce and consumer packaged goods, “remained negative” in the quarter. She said the pace of the year-to-year decline in “online commerce has slowed compared to last quarter,” but was uncertain if the sector will significantly rebound anytime soon.
People take selfies in front of the logo of Facebook parent company Meta on November 9, 2022 in Menlo Park, California. Meta will lay off more than 11,000 staff, the company said on Wednesday.
Liu Guanguan | China News Service | Getty Images
For Loftie, Amazon and Google provide better value because a shopper is showing intent by searching for a particular item. Hassett purchased keywords like “white noise” as well as “Loftie” to make sure that consumers who wanted to find his products weren’t misdirected.
“The work we do off of Amazon on advertising definitely pays dividends on Amazon because people are going there and typing in Loftie,” Hassett said, adding that his shift in ad spending helped Loftie generate a record $250,000 revenue over a four-day stretch during the holidays.
Investment bank Cowen noted in a recent survey of ad buyers that “Amazon was the most popular survey response when we asked respondents which ad platform outside of GOOG / FB properties could emerge or is emerging as a meaningful part of buyers’ Digital ad spend, ahead of TikTok.”
The survey indicated that there continues to be “broad interest among advertisers” to grow their Amazon budgets in 2023, with 54% of surveyed Amazon advertisers saying they are planning to spend more this year than last.
While Facebook remains a core piece of a brand’s budget, its influence is diminishing, and the company’s investment in its TikTok-like Reels product will take a few years to make a significant financial impact, the Cowen analysts said.
“In the near term, we expect Meta ad share to decline further in ’23 given macro headwinds and the pivot to Reels,” they wrote.
A Meta spokesperson declined to comment for this story but sent CNBC examples of brands that the company says increased their allocation to Facebook and Instagram and have seen improved performance from ads on the site.
Like Loftie, Robin Golf also had to move away from Facebook in promoting its catalog of golf clubs and related equipment. CEO Peter Marler said over the past year more of that money has gone to Amazon.
Between July 2021 and the same month a year later, Robin’s cost to acquire a customer jumped 260% to $180 from $50, Marler said. He attributed most of the surge in costs to Facebook’s reduced targeting abilities, and said Google also wasn’t performing as well.
“We started investing more heavily in Amazon,” Marler said. “We shifted budget away from Facebook, we shifted budget away from Google, and we shifted to Amazon, and our Amazon sales have shot up by about 600% in 2022.”
Overall, the value of the tracking cookie has withered because of a renewed emphasis on consumer privacy. There are very few major online ad platforms that don’t rely on targeting, Marler said.
“Changes in the efficacy of those platforms really have forced us to reexamine our reliance on them,” he said. “We are actively moving our budgets away and decreasing the amount of money that we are spending with Meta.”
‘Not our customer’
Reliance on Amazon has its own pitfalls. The company is a dominant force in online retail and can make or break a brand’s success based on its performance on the site. That’s particularly risky because Amazon has its own ballooning private label business, which regularly rolls out products that compete with sellers on the platform.
Vitamin company Manna Health has been increasing its presence on Amazon, committing more of its ad budget to the site since the iOS changes, with plans to possibly double its allocation in 2023 from less than 10% currently, said marketing chief Ryan Farmer.
But he worries about brand loyalty, when so many transactions take place on Amazon.
“It’s not our customer, it’s Amazon’s customer,” Farmer said.
Farmer likens Amazon’s online ad system to Google’s in that companies run ads based on keywords that they think resonate with potential customers who may be searching for certain products. Manna also uses Amazon’s demand-side platform advertising tool, which is helpful for placement in banner ads that can be seen by people “searching for certain things,” Farmer said.
Manna, like Loftie and Robin Golf, maintains a customized Amazon home page that contains graphics, slogans, and a listing of the company’s various products that it’s selling on Amazon. However, the system is a “black box,” Famer said, because it doesn’t provide the kind of demographic data or other information to help Manna retain and nurture its customers.
Manna doesn’t even get contact information for the buyer. CEO Jeff Hill said he wished that Amazon offered “more insight into the customer, obviously, and sharing emails would be a bare minimum” so Manna could build a community and talk to clients.
“‘Hey, you bought this joint supplement, you know you might also be interested in our new bone supplement,” Hill said, describing a potential follow-up email. “It would help our company out and we would be able to buy more on Amazon and it would be mutually beneficial for us to make it to the customer and drive more traffic back to Amazon and the products.”
Amazon declined to provide a comment for this story.
Rachel Tipograph, CEO of marketing technology firm MikMak, said there are other unforeseen costs tied to Amazon advertising.
Unlike Meta, which just requires you to login to Facebook’s business manager to start buying ads, advertising on Amazon comes alongside listing products on the platform and a host of other services that brands are often buying, including warehouse space. Premium ad placement is the equivalent of slotting fees in retail stores, where brands pay for shelf visibility.
A Target customer looks at a display of board games while shopping at Target store on December 15, 2022 in San Francisco, California.
Justin Sullivan | Getty Images
Tipograph expects these costs will “cause the pendulum to swing back” towards brand promotion, and companies will rely more on channels that direct traffic to their own website and give them more control over their expenses.
“What CFOs want is profitable advertising, profitable growth,” Tipograph said, “and they want to know that they are driving incremental growth.”
Ryan Flannagan, the CEO of e-commerce marketing firm Nuanced Media, said that as Amazon’s ad business has grown, so has the competition to run “premium copy and visuals.”
Companies that aren’t investing in Amazon ads are “basically losing market share, because they’re not defending themselves,” Flanagan said.
Amazon has plenty of work ahead to keep its ad offerings attractive enough for brands to continue forking over bigger portions of their budget. But for now, companies like Loftie are happy with the returns they’re getting from Amazon, given the challenges with Facebook.
The way Hassett sees it, even with the rising expenses and associated risks, Amazon is providing enough value to justify the headaches.
Lloyds Bank this weekend fired a salvo at Facebook-owner Meta, slamming it for failing to stop a ‘Wild West’ surge in online shopping scams. Britain’s biggest retail bank – which has 26 million customers – blasted the social media giant for enabling so-called ‘purchase’ frauds.
The banking group claimed two-thirds of the scams start on Meta-owned platforms, which also includes Instagram.
Banks and insurance groups have been frustrated for years that social media companies are not made to pay their fair share of compensation to victims for frauds hosted on their platforms.
But it is highly unusual for a lender like Lloyds to take aim at an individual tech firm like Meta.
The intervention puts Lloyds Banking Group boss Charlie Nunn at loggerheads with Facebook tycoon Mark Zuckerberg.
Face-off: Lloyds Banking Group boss Charlie Nunn and Meta executive chairman Mark Zuckerberg
British banks have previously urged ministers to tackle online financial scams amid concerns that criminals are using Facebook and Google to place fraudulent advertisements with impunity.
The failure of internet giants to check the authenticity of digital ads has led to a surge of scams, they claim. These include ‘brand cloning’, where criminals impersonate legitimate businesses to dupe victims into handing over their savings. Purchase fraud tends to target younger consumers who are tricked into paying for sought-after items that don’t actually exist.
Victims are lured by the offer of a cheap deal – often advertised on social media – and then asked to send money from their own secure online bank account direct to the seller via a transfer system known as faster payments.
However, this provides very little protection when things go wrong.
The scam is a small but growing part of online fraud, which now accounts for 40 per cent of all crime and costs £7 billion a year, according to latest government figures.
The number of purchase frauds has soared by 40 per cent since the start of the pandemic to over 117,000 cases in 2022, according to the UK Finance trade body. It coincided with a boom in online shopping, more time spent on social media and shortages of certain goods caused by supply chain issues.
Lloyds, whose brands include Hailfax and Bank of Scotland, estimates that someone falls victim to the scam on a Meta-owned platform every seven minutes, costing consumers £27 million this year alone.
The average amount lost by the victims of purchase scams is around £570. Clothes, trainers, gaming consoles and mobile phones are among the most common goods being falsely advertised for sale.
Lloyds said it reimburses ‘the majority’ of victims and has invested ‘hundreds of millions of pounds’ in security systems to beat the scammers.
But refunds don’t address the emotional trauma of being a victim of fraud or stop the flow of money to organised crime, it added.
‘Social media has become the Wild West of online shopping in recent years, with very few checks in place to verify who is selling what,’ said Liz Ziegler, fraud prevention director at Lloyds Banking Group.
The Government’s new national fraud strategy allows banks more time to slow down suspicious payments. But Ziegler said banks couldn’t fight the ‘epidemic of scams’ alone.
‘It’s high time tech companies stepped up to share responsibility for protecting their own customers,’ she said.
‘This means stopping scams at source and contributing to refunds when their platforms are used to defraud innocent victims.’
An amendment to the long-delayed Online Safety Bill requires social media firms to prevent paid-for fraudulent adverts, regardless of whether the ads are controlled by the platforms or an intermediary. It followed pressure from consumer groups, charities and the banking industry who claimed the Government’s approach to tackling online fraud was ‘flawed’.
But critics say the proposals still don’t go far enough. ‘Fraudsters don’t just pay for adverts or create fraudulent content that fits within the scope of the Bill,’ said a banking industry source. ‘The exclusion of online marketplaces like Facebook’s is therefore a significant loophole.’
Campaigners say only the threat of fines will force the social media companies to act.
‘Without penalties there’s nothing in it for them to stop the scams from happening,’ said consumer champion Baroness Altmann. She fears the Government is ‘absolutely terrified of upsetting the tech companies’ and of being seen to clamp down on the free market.
James Daley, founder of consumer campaign group Fairer Finance, said social media sites had become ‘a gateway for fraudsters’.
‘Firms like Meta have a clear responsibility to step up and protect their users,’ he said. ‘But if past experience is anything to go by, it’s unlikely these firms will do much if they don’t have to.
‘The Government announced plans to introduce new protections last year, but these have now been kicked into the long grass again.’
Meta said purchase fraud was ‘an industry-wide issue’ with scammers using ‘increasingly sophisticated methods’ to defraud people ‘in a range of ways, including email, text and offline’.
A spokesman said: ‘We don’t want anyone to fall victim to these criminals which is why our platforms have systems to block scams. Financial services advertisers now have to be authorised by the Financial Conduct Authority.’
The Department for Science, Innovation and Technology was approached for comment.
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NHS trusts are sharing intimate details about patients’ medical conditions, appointments and treatments with Facebook without consent and despite promising never to do so.
An Observer investigation has uncovered a covert tracking tool in the websites of 20 NHS trusts which has for years collected browsing information and shared it with the tech giant in a major breach of privacy.
The data includes granular details of pages viewed, buttons clicked and keywords searched. It is matched to the user’s IP address – an identifier linked to an individual or household – and in many cases details of their Facebook account.
Information extracted by Meta Pixel can be used by Facebook’s parent company, Meta, for its own business purposes – including improving its targeted advertising services.
Records of information sent to the firm by NHS websites reveal it includes data which – when linked to an individual – could reveal personal medical details.
It was collected from patients who visited hundreds of NHS webpages about HIV, self-harm, gender identity services, sexual health, cancer, children’s treatment and more.
It also includes details of when web users clicked buttons to book an appointment, order a repeat prescription, request a referral or to complete an online counselling course. Millions of patients are potentially affected.
This weekend, 17 of the 20 NHS trusts that were using Meta Pixel confirmed they had pulled the tracking tool from their websites.
Eight issued apologies to patients. Multiple trusts said they had originally installed the tracking pixels to monitor recruitment or charity campaigns and were not aware that they were sending patient data to Facebook. The Information Commissioner’s Office (ICO) is investigating.
The Observer can reveal:
In one case, Buckinghamshire Healthcare NHS trust shared when a user viewed a patient handbook for HIV medication. The name of the drug and the NHS trust were sent to the company along with the user’s IP address and details of their Facebook user ID.
Alder Hey Children’s trust in Liverpool, sent Facebook details when users visited webpages for sexual development problems, crisis mental health services and eating disorders. It also shared data when users clicked to order repeat prescriptions.
The Tavistock and Portman NHS foundation trust in London shared data with Facebook when users clicked the information page for its gender identity service, which specialises in working with children who have gender dysphoria. Data was also shared when users viewed the webpage for the Portman Clinic, which “offers specialist help with disturbing sexual behaviours”, and clicked for details on how to be referred to the service.
Surrey and Borders Partnership NHS trust shared data with Facebook when a patient clicked buttons indicating they were under 18, lived in Brighton and wanted to access mental health services.
Other NHS trusts sent detailed receipts to Facebook when users accessed pages for appointment bookings or completed online self-help courses. Barts Health NHS trust, which serves a population of 2.5 million in London, shared data with Facebook when a user clicked to “cancel or change an appointment” or added a visit to a particular hospital to their itinerary.
The Royal Marsden, a specialist cancer centre, sent data on patients requesting referrals, viewing information about private care and browsing pages for particular cancer types.
Information sent to the company is likely to include special category health data, which has extra protection in law and is defined as information “about an individual’s past, current or future health status”, including medical conditions, tests and treatment and “any related data which reveals anything about the state of someone’s health”. Using or sharing it without explicit consent or another lawful basis is illegal.
Once the data reaches Facebook’s servers, it is not possible to track exactly how it is used. The company says it prohibits organisations from sending it sensitive health information and has filters to weed such data out when it is received by mistake.
Professor David Leslie, director of ethics at the Alan Turing Institute, said the transfer of data to third parties by the NHS risked damaging the “delicate relationship of trust” with patients. “Our reasonable expectation when we’re accessing an NHS website is that our data won’t be extracted and shared with third-party commercial entities that could [use it] for targeting ads or linking our personal identities to health conditions,” he said.
He accused Meta of doing too little to monitor what information it was being sent. “Meta says we don’t permit certain types of data being sent to us but they haven’t spent enough on resources to audit this,” Christl said.
In most cases, the information sent to Facebook during a test by the Observer was transferred automatically upon loading a website – before the user had selected to “accept” or “decline” cookies – and without explicit consent. Only three of the 20 trusts mentioned Facebook or Meta in their privacy policies at all. Several of the trusts had previously promised patients that their information would not be shared or used for marketing.
Collectively, the 20 NHS trusts found using the tracking tool serve a population of more than 22 million people in England, stretching from Devon to the Pennines. Some had been using it for several years.
In a statement, the trust apologised to patients and said the Meta Pixel had been active on its website in error. “It was installed in relation to a recruitment campaign, and we were not aware that Meta was using this information for marketing purposes,” a spokesperson said. “Immediate action has been taken to remove it.”
The Royal Marsden said it regularly reviewed its privacy policies but did not say whether it planned to remove the pixel. Barts said it was removing trackers from its website “following the disclosure that they were being used to extract personal information beyond the purpose for which they were originally installed, which was to measure responses to recruitment advertising campaigns.”
Several said they were unaware of how data would be used and apologised to patients for failing to get consent. Aside from the 17 who pulled or are pulling the tool, Hertfordshire Partnership trust and Royal Marsden said they were investigating the issues internally and only the Tavistock and Portman did not respond to requests for comment.
The ICO said it had “noted the findings” and was considering the matter. “People have the right to expect that organisations will handle their information securely and that it will only be used for the purpose they are told,” a spokesperson said.
Several leading US hospitals are currently being sued by their patients over their use of the pixels, which are tiny pieces of code that are invisible during normal browsing.
Meta is also facing legal action over accusations of knowingly receiving sensitive health information – including from pages within patient portals – and not taking steps to stop it. The plaintiffs claim Meta violated their medical privacy by intercepting “individually identifiable health information” from its partner websites and “monetising” it.
Jeffrey Koncius, a partner at Kiesel Law in California and one of the attorneys leading the action, said the data transfer by the NHS websites appeared similar to what was happening in the US. “Imagine if a hospital sent a letter to Mark Zuckerberg and said, ‘We want you to know that Jeff Koncius is our patient,’” he said. “That’s exactly what’s happening here. It’s just happening electronically.”
The Liberal Democrat health spokesperson Daisy Cooper described the findings as a “shocking discovery” that raised serious questions about the protection of patient information. “The NHS must investigate how this happened and how widespread this alleged data breach is,” she said.
NHS England said individual trusts were responsible for ensuring they followed data protection laws. “The NHS is looking into this issue and will take further action if necessary,” a spokesperson said.
Meta said it had contacted the trusts to remind them of its policies, which prohibited organisations from sending it health data. “We educate advertisers on properly setting up business tools to prevent this from occurring,” the spokesperson said. They added it was website owner’s responsibility to ensure it complied with data protection laws and had obtained consent before sending data.
The company did not answer questions about the effectiveness of its filters designed to weed out “potentially sensitive data”, or which types of information they would block from hospital websites – or say why it permitted NHS trusts to send it data at all, given the high risk it could reveal details about the web user’s health.
“Like any technology, our filters won’t be able to catch everything all of the time. However, we are constantly improving our mechanisms to make sure we catch as much as we can,” a spokesperson said.
The company offers its business tools to advertisers, saying they can help them use health-based advertising to “grow your business”. In one guide, it says data collected through its business tools can improve users’ Facebook experience by showing them ads they “might be interested in”. “You may see ads for hotel deals if you visit travel websites,” it explains.
Sam Smith, at medConfidential, a data privacy campaign group, said it was never appropriate for the tools to be used to collect health information. “There’s no benefit to NHS trusts in giving this information away. It’s like asking a tobacco company to sponsor a cancer ward,” he said. “NHS England is tacitly approving this by not enforcing anything better.”