Bye-bye, Buy Button? Dynamic Ads are Winning Social Revenue

Wasn’t it just a year ago that we kept hearing folks in-the-know confidently dismiss Facebook as “dead?”

Well, for a social media network that had supposedly flatlined, it sure is showing strong vital signs. During their earnings call at the end of July, Facebook reported a revenue of $6.436 billion for the second quarter, up 59% from $4.024 billion in Q2 of 2015. Additionally, the company boasted a 186% net income spike, up from just $719 million ($0.25 per share) this time last year to an astonishing $2.055 billion ($0.71 per share) currently.

Yes, Facebook is very, very much alive.

And what helped resuscitate the social giant was, in part, dynamic product ads.

Facebook’s advertising on top again

Launched in early 2015, Facebook’s dynamic ads were intended as a way for online retailers with larger inventories to better capture consumer intent. And it’s worked. After a slow start, dynamic product ad growth impressions jumped last November, coinciding with the start of holiday shopping. But then it just… never really stopped going up. Even in the first quarter of 2016, a time when ecommerce sales are typically down, dynamic ad growth impressions and spends continued to increase every month.

And it’s not showing signs of quitting. Recently, Nanigans reported that the top 20 highest-spending advertisers saw their average return on Facebook ads improve by 75% in just the second quarter alone. This return success has been helped along, of course, by higher overall spends, but it’s also been helped by the benefit of a bigger overall audience — daily active users of Facebook are up 17% over this time last year, and some of these users are probably being drawn in by some of Facebook’s newest features, like Live video and 360 Photos.

Twitter’s struggles continue

Basically, everything’s coming up Facebook these days. But unfortunately, the same can’t quite be said for Twitter. While their new active user numbers are up, all the other numbers are way, way down. In fact, Twitter’s stock plummeted more than 10% after their Q2 earnings were released, in part due to the fact that revenue expectations for the third quarter came in at $590-610 million, well below original expectations for $678 million.

A large part of Twitter’s growth problem is that it’s struggling to attract and retain advertisers. After the years of planning, testing, partnering, and third party integration that went into the Buy Now button — a Twitter card that permits users to make purchases from merchants directly inside the Twitter app — in late spring Twitter reportedly disbanded the commerce team behind Buy Now and ceased all product development. Instead, Twitter now appears to be turning its focus to ramping up its own dynamic ad program.

But why have dynamic ads taken off while the buy button has floundered? Good question.

The magic is in the intent

The way dynamic ads work is a merchant connects their product catalog or product feed to a social platform, creates an ad template, and sets up parameters such as tags, tracking, and audience demographics. The social platform then uses these parameters to dynamically serve product ads to people based on their profile, browsing history, and previous visits. Also called retargeting, this method is highly successful because it captures user intent much more effectively than any other form of digital advertising.

And Facebook is, perhaps, in the best position of all the social networks to capture audience intent. That’s because it collects the most user data. On Facebook there’s a place to enter almost everything about yourself, from where you went to school to the books you’ve read to your hobbies and your favorite sports teams. With all the available information for advertisers to mine, it’s no wonder Facebook’s dynamic ads have been performing so well.

But is this really goodbye for the Buy button?

The short answer is: not necessarily. The long answer is, well: not necessarily.

In June Nathan Hubbard, former Head of Global Media + Commerce at Twitter, tweetstormed that Twitter’s foray into buy buttons had simply been laying the groundwork for the future, and that he wouldn’t be surprised if Twitter returned to them at a later date when users were more ready:

Meanwhile, Pinterest hasn’t moved away from in-app purchasing. In fact, just a couple of weeks ago they expanded Buyable Pins — their version of the buy button — from mobile apps to the web. Arguably, if any social media platform can make in-app purchasing work, they can, since products and brands are already central to the Pinterest user experience. But it will be interesting to see if Pinterest can generate momentum (and revenue) with this form of advertising, or if they too will eventually refocuses their efforts elsewhere.

Dynamic ads are working well today, but they certainly won’t work forever. That’s why social media advertisers need to stay on top of technology and trends to be ready for whatever’s coming next (hint: it’s likely video-related).

And as always, assume that all reports of death have been exaggerated.