Today's News

• META ADS • What the Q1 Results Mean for Marketers

• TIKTOK • What a “No Algorithm” Sale Looks Like

  • Slow-Death Scenarios

• COMMERCE • Explain Your AI’s Recommendations

• AGENCIES • WPP Considers Breaking Up: Reports

• Q1 REPORTS • Google, Snapchat, and More

META ADS • What the Q1 Results Mean for Marketers

Every Friday, we check in with our Meta Ads correspondent Andrew Foxwell. Andrew has visibility into $300 million dollars in Meta ad spend through his Slack community called Foxwell Founders.¹

This week:

• Meta's ad business is profitable, but the reality labs are losing money.

• Advertisers are facing rising CPMs and limited ad inventory.

• The transition to AI and new products may not be easily monetizable.

• Meta's strategy of expanding inventory may not have the desired impact.

• The future potential of AI search results as ad placements is uncertain.

• Despite concerns, long-term investors still find Meta attractive.

Be sure to check out Andrew’s Foxwell Founders community of digital ad buyers and his extensive training in the digital ad space.¹

TIKTOK • What a “No Algorithm” Sale Looks Like

There’s been a lot of talk in the last 24 hours about reports that TikTok is willing to sell its U.S. operations to another group, but would not sell its discovery algorithm as part of the deal — reports that TikTok’s parent company denies, by the way.

Some industry analysts are now weighing in on what that would look like, and whether it’s even possible.

The Algo Doesn’t Matter

Part of what made TikTok’s algorithm better was that it relied more on the actions you took on specific videos (how long you watched, at what point you swiped away) and less on how the other platforms works (who you followed, what accounts you engaged with).

Culture > Algorithm

The piece points out that, even so, this wouldn’t be as simple as just hiring a bunch of engineers and throwing their attention behind it. Meta has a million engineers and Reels’ algorithm still isn’t nearly as captivating as TikTok’s.

And part of that is because TikTok is more than an app — it’s become a culture, with its own in-jokes and slang. Consider Threads and X — both are microblogging platforms, but you only need a few seconds on each to understand how different the vibe is between them.

Slow-Death Scenarios

And there’s something else that could weigh TikTok down in the year ahead that isn’t related to its algorithm at all.

So that’s one scenario — another one apparently being considered: The “take our toys and go home” approach.

What Does it Mean for Marketers?

Honestly, probably not much at this point.

Although Reels isn’t quite as strong in discovery, and Shorts isn’t as set up in creator compensation, marketers really only care about two things:

1. Can I reach a lot of my potential customers on similar platforms (yes)

2. Can I use the same format and production as we did on TikTok (also yes)

And with the war-chests that both YouTube and Meta seem ready to keep plowing into vertical video, TikTok’s days as a standalone unicorn were probably numbered anyway.

COMMERCE • Explain Your AI’s Recommendations

When selling online using AI tools, your brand’s ability to make a personal touch can make all the difference.

That's the key finding behind some recent research that found when AI explains why it recommends a product, customers are more likely to make a purchase.

For instance, an explanation like "This cream is our most repurchased item" can increase customer trust and interest.

More Purchases and Clicks

Researchers conducted four experiments focusing on items like sneakers, shirts, and face creams.

• Explanations led to about a 15% increase in purchasing likelihood

• And a stunning 55% more clicks on a "See more details" link for t-shirts, compared to those who didn't receive any explanation

Transparency Fosters Trust

The rationale is simple: transparency fosters trust. Most shoppers aren’t familiar with how AI works, and a bit of insight into its logic helps mitigate this mystery, making the technology less daunting and the brand seem more friendly.

Your Mileage May Vary

A couple of caveats — the researchers tested against relatively inexpensive products, so that might not align with what you sell. And they did these experiments via a Chinese survey site, which might not directly translate to other cultures.

Still, though, the take-home message for e-commerce businesses is clear: Explain your AI's logic, particularly for functional products.

A well-placed "See why you got this recommendation" button could give you a sales uplift. If nothing else, it’s worth testing.

The research was published recently in the Journal of Interactive Marketing. The paper is called When Post Hoc Explanation Knocks: Consumer Responses to Explainable AI Recommendations.

AGENCIES • WPP Considers Breaking Up: Reports

There is growing speculation that the world’s largest ad agency — WPP — might soon break up.

The group’s Q1 revenues were down somewhere between 1% and 5%, depending on which accounting model you use. And its market cap is lower than its competitors like Publicis Groupe or Omnicom.

Over the last few years, the holding group has worked to try to integrate all its component agencies a little tighter — these smaller sub-agencies came to WPP through acquisitions, and many maintain their own brand and silo’ed teams.

Q1 REPORTS • Google, Snapchat, and More

Other ad platforms reported Q1 results yesterday, so here’s a quick rundown for you:

Alphabet: Reported strong earnings, driven by growth in Google's ad revenue, which jumped 10%, and its thriving cloud computing business. more

Snapchat: Saw a surge in users and revenue in Q1, with daily active users increasing by 17% year-over-year, and revenue growing 12% from the same period last year. more

Microsoft's Bing Ads saw a 14% rise in revenue earned. more 

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