Meta's Jonathan Kratz on the Challenging Times Faced by Advertisers

Jonathan Kratz, head of industry of Technology, Mobile and Connectivity at Meta, describes the current challenges advertisers are facing in this economic climate. He shares the guidance he is giving his clients and specific strategies to help advertisers increase their advertising performance.

Muse: We're living in a time of economic uncertainty, and leaders are faced with the challenge of driving growth amid a continually changing business context. How are you helping your advertising clients navigate this challenging time?

Jonathan Kratz: I first want to acknowledge how challenging a time this is for business leaders. Leaders today have to sort through a host of conflicting signals on the economy at large, as well as the most dynamic business context in years, with dramatic changes in monetary policy reverberating through the market.

Are we headed toward a prolonged recession? Or is the soft landing already taking place, with the next wave of growth just around the corner? Depending on which data set you look at, and on which day you look, you might come to a different conclusion.

To support our partners navigating this uncertainty, we are arming them with data to help them make well-informed decisions for their businesses on Meta platforms. Specifically, we are underscoring the unique opportunity partners have to capitalize on the historically strong performance many are seeing on the platforms.

It's true—performance on Meta's platforms is as strong as it's been in years and I've been helping give my clients the confidence to lean into that performance and capitalize on this "gold rush" moment. In Q4 2022, advertisers using A.I.-powered tools on Meta saw over 20 percent more conversions than the year prior. Combine this with the average price per ad decreasing 17 percent YoY, and you have a declining cost per acquisition that has resulted in higher returns on ad spend.

What's more—we've seen this impact validated by researchers. We recently did a study with economists at UC Berkeley to understand the impact our services make, and they concluded that every dollar spent on our ads drives on average $3.31 in revenue for our advertisers in the U.S.

What are the contributing factors of this rise in performance at Meta?

There are two main factors leading to the increased performance we are seeing—the first being our investment in A.I. More than 20 percent of content in your Facebook and Instagram feeds is recommended by A.I. from people, groups, or accounts you don't follow. Across all of Instagram, that's about 40 percent of the content you see.

Since we launched Reels, A.I. recommendations have driven more than a 24 percent increase in total time spent on Instagram.

In-feed recommendations are contributing to engagement, and we've seen Reels time become more incremental to overall engagement on our services as we continue to improve our recommendation system.

In the area of A.I. models, we've been evolving our modeling in our ads ranking for many years, through numerous changes. A recent example is our work to support larger and more powerful models and use more advanced modeling techniques like transformers to improve our ability to select the best ad for each person. Using A.I., we can make thousands if not millions of iterations and combinations that ultimately optimize to drive improvements in performance. This was the huge step forward we have seen with our Advantage+ Shopping Campaigns product, and we are taking these learnings and building them into the rest of our ad stack.

The second factor is our increase in ad supply. Our core platforms have never been healthier. We reach more than 3 billion people monthly across our family of apps, and Facebook also reached the milestone of 200 million daily actives in the U.S. and Canada after last quarter reaching 2 billion daily actives worldwide.

We are fueling this growth in a couple ways. First, we remain focused on building engaging experiences for people who use our apps. We came into 2023 with a strong foundation as Reels continues to scale, driven by an uptick in video consumption across our platform. In fact, Reels plays across FB and IG have more than doubled over the last year.

The other side of growing supply comes from more effectively monetizing the surfaces within our apps, such as launching new placements on Instagram. In the near-term, enhancing the performance of Reels ads, in the same way we did many years ago with Stories, is a primary focus.

What can advertisers do to capitalize on this increase in performance you're seeing?

Recently we have evolved our best practices and created something called the Performance 5—a set of strategies for advertisers based on proven tactics that we developed from extensive meta analysis of hundreds of tests. Whether your goal is to reach new audiences, drive lower CPAs, maximize ROAS, we believe these updated strategies will lead to better performance. They are:

• Account simplification 
• Automation
• Creative differentiation 
• Data quality
• Results validation

You can learn more about how to implement these strategies here.

What excites you most about the future of performance marketing, and how are you preparing for that future?

I think the advancements in A.I. is what really excites me about the future. But what is really exciting is that A.I. is not just a thing of the future, it's here now. There is so much advertisers can do to lean into A.I. right now, while also preparing themselves for the future.

First is to recognize that A.I. has powered the Meta ads platform for years. A.I. is the foundation of our discovery engine and our ads business. Better performance and more cost effective inventory creates a unique opportunity to drive profitable growth for your business during a time when it's never been more needed.

One way you can start testing now is with our Advantage+ shopping campaigns (ASC), an always-on solution for direct-to-consumer and single-branded retailers that drives online sales by leaning on new machine-learning models to connect relevant ads to interested shoppers. With ASC, advertisers can create a single campaign for multiple performance objectives, and Meta will automate the campaign creation process across targeting, optimization, creative and destination to efficiently deliver the right ad to the right person.

I'm optimistic about the future of our performance platform and I'm excited to see the ways marketers continue to leverage new technologies to continue to grow their business even in uncertain times.