Despite Elections Scandal, Facebook Likely to Remain a Powerhouse

The flurry of inquiries and new transparency policies show no signs of slowing the social media giant – especially when it comes to its bottom line.

by David Pierson, Los Angeles Times / October 25, 2017

(TNS) -- Negative headlines. Congressional inquiries. Corporate apologies. The heightening scrutiny surrounding Facebook after it allowed Russian trolls and inflammatory political ads to spread on its network is the kind of thing companies would do anything to avoid.

But don’t expect it to harm the tech giant’s bottom line.

As the political world looks to apply the lessons of Donald Trump’s victory to future campaigns, one of the few clear conclusions is that Facebook played an outsized role in propelling the candidate to his improbable win.

The company’s ability to affordably target hyper-specific audiences with little to no transparency gives it a distinct advantage over other forms of media, researchers and political operatives believe.

Political ads on Facebook have fueled controversy. They spread Russian propaganda and reportedly helped the Trump team suppress black support for Hillary Clinton and aided a conservative political action committee in targeting swing voters with scaremongering anti-refugee ads. Yet the backlash is unlikely to dissuade future campaigns from relying on Facebook’s advertising platform.

Even the threat of new regulation governing the disclosure rules for political ads on social media can’t stunt the company’s stock price, which continues to reach new heights.

If anything, the controversies appear to be functioning like a giant advertisement for the effectiveness of Facebook’s political advertising business.

“I don’t lose sleep over Facebook’s business. I lose sleep over the future of democracy,” said Siva Vaidhyanathan, a professor of media studies at the University of Virginia and author of a book on Facebook out next year called “Anti-Social Media.”

Political advertising represents a small percentage of Facebook’s booming $26.9 billion ad business, which accounted for nearly 15 percent of all the money spent on digital advertising worldwide in 2016, according to EMarketer. But it’s growing rapidly.

After years of trepidation, campaigns are adjusting to the fact that audiences are increasingly found online rather than via TV, radio or print.

Political spending on digital advertising soared in the 2016 election cycle to $1.4 billion, according to Borrell Associates, a data tracking firm.

That’s nearly an 800 percent increase from the last presidential election, when only $159 million was spent on digital advertising, a category that encompasses search, display, email, video, social media and mobile.

Digital political spending is expected to rise to $1.9 billion in the 2018 election cycle and $2.8 billion in 2020, the firm said.

The main beneficiary of those increasing ad dollars probably will be Facebook. The social network took $4 out of every $5 spent on social media in the 2016 election cycle, said Kip Cassino, executive vice president at Borrell Associates.

“No one can brush off or minimize the impact of Facebook on the 2016 presidential contest, both as a platform for advertising and as the perfect laboratory for testing and honing messaging targeted to various voter blocs,” Cassino said.

The sea change was first evident with the spread of partisan news, conspiracies and hoaxes on Facebook during the campaign.

Then news emerged last month that Facebook had sold about $100,000 in ads to a Russian troll farm. The shadowy group, known as the Internet Research Agency, placed ads believed to have been seen on at least 10 million Facebook users’ news feeds. The ads were aimed at inflaming divisive social issues such as race, gun control and gay rights to potentially tip the scales in Trump’s favor.

Facebook has responded to the growing Russian scandal by cooperating with congressional committees and pledging more transparency, including requiring buyers of political ads to disclose their identity and reveal other ads they’ve run. The company had previously argued against requiring disclaimers on political ads, saying it would be impractical — akin to placing disclosures on small items such as bumper stickers and pins.

Such disclosures could have sounded the alarm on Russian meddling earlier.

“I don’t want anyone to use our tools to undermine democracy,” Zuckerberg said last month.

Facebook said it will introduce more transparency in the coming months, though no details have emerged about how it will deal with so-called dark posts — ads like those bought by Russian operatives that have no link to a candidate or campaign. Instead, they’re designed to sensationalize wedge issues such as immigration in hopes of racking up more “likes” and “shares,” giving their backers a larger audience and more bang for their buck.

Russian groups reportedly placed dark posts on Facebook referencing the Black Lives Matter movement to inflame racial tension in Ferguson, Mo., and Baltimore.

Currently, no law requires such ads to disclose who paid for them, what other ads or issues they promote, whom the ads were directed at and for how long. Such information is readily available on other mediums such as TV to ensure voters aren’t being misled or manipulated.

Senate democrats Amy Klobuchar of Minnesota and Mark Warner of Virginia unveiled legislation this month called the Honest Ads Act, which would make political ads on social media subject to the same rules as on traditional media.

“As the technology companies continue to grow in the political advertising space, the importance of greater transparency and disclosure will only grow along with it,” said Rep. Adam Schiff of California, the ranking Democrat on the House Intelligence Committee, who favors regulating political ads online.

There is no evidence the Russian ads were linked to the Trump campaign. But there’s a strong belief in some quarters that Facebook was a difference maker in helping Trump take the White House through persuasion and fundraising.

Trump’s digital team was able to fire up new support and amass $240 million in small donations, mostly through Facebook, at a cost of $94 million. That’s about 20 percent better than a typical return on investment in digital campaigns, industry officials said.

“I understood early that Facebook was how Donald Trump was going to win,” Brad Parscale, the Trump campaign’s digital director, told CBS’ “60 Minutes” this month. “Twitter is how he talked to the people. Facebook was going to be how he won.”

Parscale even said Facebook embedded Republican employees in the Trump campaign to help them maximize the platform’s potential. Facebook reportedly offered the same level of support to the Clinton campaign but was turned down.

Facebook did not reply to requests for comment.

David Karpf, an associate professor at George Washington University and author of “Analytic Activism: Digital Listening and the New Political Strategy,” said it would have been fair to refuse Facebook’s assistance based on the social network’s performance in the 2014 election cycle.

But by 2016, Facebook’s data were exponentially more robust and precise at prospecting for would-be supporters and donors. The Trump team took a chance.

“It sounds like Facebook went to both campaigns and said they had magic beans,” Karpf said. “The Clinton team said, ‘We’ll pass, we’ve seen the returns,’ and Parscale and the Trump team said, ‘Magic beans? Take my money.’ We can call it dumb luck or stumbling into innovation.”

The response from both parties, despite the likelihood voters were manipulated by a foreign nation state, will be to spend more on the world’s biggest social network and other social media platforms.

“We certainly hope Democratic campaigns spend more on digital advertising this cycle but not because of Russia,” said Patrick McHugh, executive director of Priorities USA, a Democratic super PAC. “It’s just the smart thing to do if you want to win elections.”

©2017 Los Angeles Times Distributed by Tribune Content Agency, LLC.