A threat to Meta's ad dominance?

Hey all, it’s Kurt Wagner in Denver. Meta’s advertising woes could lead to long-term issues. But first...Three things you need to know today [View in browser]( [Bloomberg]( Hey all, it’s Kurt Wagner in Denver. Meta’s advertising woes could lead to long-term issues. But first... Three things you need to know today: • Adobe is buying videos to train its [coming AI text-to-video tool]( • Apple retail workers in a New Jersey store [have petitioned to unionize]( • Amazon will stop paying developers [to create apps for Alexa]( Meta ads are ‘terribly broken’ Many advertisers who rely on Facebook and Instagram have noticed that Meta Platforms Inc.’s automated ad systems have taken a major hit in recent weeks. Costs are up significantly, returns are down, and Meta hasn’t offered any explanation for what’s going on. Many marketers are totally confused and very much frustrated that things appear to be [“terribly broken.”]( The big picture problem is that these issues are costing Meta business. I spoke to half a dozen marketers about this problem over the past week, and all told me that they’ve started moving some of their Meta-dedicated advertising budgets to other platforms. “This is an amazing time to be Google or TikTok,” one advertiser told me. Normally, watching clients run to a competitor would be a terrifying reality for any company. But this whole exercise reminded me that Meta isn’t just any company — it’s the [second-largest digital advertising platform in the world](. And even though marketers are testing the waters elsewhere, many are still completely beholden to Meta for their business success. Meta commands the majority of advertising budgets for many small direct-to-consumer businesses — and usually offers the best results, too. Packing up for Snapchat or TikTok or YouTube just isn’t as simple as it sounds. “Most advertisers (especially smaller ones) can’t afford to diversify effectively, and Meta is still the best lever for them,” said [Barry Hott](, a growth marketing consultant with more than 16 years of experience in the industry. “The problem is that it’s another platform to set up, manage and create for, which can stretch resources thinner.” The idea that Meta has a stranglehold over its small business advertisers isn’t new. We saw this reality play out a few years ago when many large brands boycotted Facebook’s products, but [small businesses couldn’t afford to stop spending](. We’ve also seen how Meta’s automated systems can cause panic for a business that is [accidentally locked out of its account](, or has a business page suspended without warning. As I was speaking with advertisers this week, I started to wonder whether the current issues with Meta’s ad systems might finally push marketers to diversify more permanently. Not just move money to TikTok until things are fixed, for example, but move money toward other platforms for good. Historically, relying on Meta as your main source of revenue or traffic is simply bad business since the company is known to change the rules of the game at any moment. (Just ask [the media industry](.) A few thought this permanent diversification strategy was likely. “I think going forward you are gonna see companies go from like 80% to 90% spend on Meta (and) try and get that down to 50% or less to avoid this problem in the future,” wrote one marketer when I asked whether this was a tipping point. “Every time this stuff happens, there’s pressure to diversify and some people inevitably do,” Hott added. Not everyone is convinced. Cody Plofker, the chief marketing officer of the beauty brand Jones Road Beauty, said that while those types of diversification conversations will definitely make it to the board level, he’s still optimistic that Meta can deliver long term. “There is a lot of volatility, but there is also a lot of upside as well,” he said of building a marketing business on Meta. “I think they are constantly tweaking and iterating, and you don’t get the good without the bad.” —[Kurt Wagner](mailto:kwagner71@bloomberg.net) The big story OpenAI CEO Sam Altman is traveling in the Mideast pitching a global public-private coalition and investment to support more chip production for artificial intelligence [as well as find ways to create additional data centers and improve energy efficiency](. 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KKR is weighing a sale or IPO of information technology solutions [firm BMC software.]( More from Bloomberg Bloomberg Technology Summit: Led by Bloomberg Businessweek Editor Brad Stone and Bloomberg TV Host and Executive Producer Emily Chang, this full-day experience in downtown San Francisco on May 9 brings together leading CEOs, tech visionaries and industry icons to explore the opportunities and pitfalls at the intersection of business and tech, from AI to the chip wars and beyond. With Evan Spiegel co-founder and CEO of Snap; Steve Huffman, co-founder & CEO of Reddit; Sarah Bond, president of XBox; and many others. [Learn More](. 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