Feb 20, 2023

How the Latest GDPR Privacy Laws Will Impact Your Facebook Ads

Post by 
Keith Berquist

You probably use Facebook Ads to market your artist and drive revenue. And, you’ve also likely heard of the GDPR and privacy laws going into effect and don’t know how they’ll affect you and your business. From increased CPM to reduced targeting options, the landscape of advertising on social media is changing and understanding the impact these new laws have on your advertising is vital to you being GDPR-compliant – if not, you may be facing some serious fines. So, we’re here to break it down for you.

What is the GDPR?

Passed by the European Union in 2018, the General Data Protection Regulation (GDPR) enhances the control individuals have over personal data that companies may process, store and use for future communication purposes. 

There’s a lot of ground to cover on how GDPR helps consumers do just this, but in short, being GDPR compliant requires:

  • Knowing where all personally identifiable information, also known as PII, is stored for every fan in your database.
  • Every single way PII is being used. Some common examples include for advertising and retargeting or as a sellable or shareable product with company partners.
  • Requesting explicit consent into marketing and communications via unchecked opt-in prompts as well as including clear instructions on what data is being collected and how it will be used.

GDPR has inspired governments around the world to pursue similar protections themselves, California’s Consumer Protection Act (CCPA) chief among them. Both policies policy reflect the general sentiment of most consumers today: a 2019 Pew Research poll found that 81% of Americans believe that the potential risks associated with companies collecting their data outweigh the perceived benefits, and 79% are “very/somewhat concerned with how [companies] use the data collected”. This isn’t just passive distrust: when Apple released iOS 14.5 – a software update that gave iPhone users the ability to restrict developers from tracking them & collecting data across apps, 85% of users worldwide opted out of third-party tracking within just 3 weeks.

In addition to shrinking audiences you can target, behemoth platforms that rely on third-party data to provide value to your marketing efforts are starting to feel the burn financially.  This month, Facebook parent company Meta will be fined roughly $414 million for GDPR violations. This may be the highest profile instance of a governing body going after Big Tech for their data collection practices, but it almost certainly will not be the last – and the implications for the entertainment industry are huge.

Have Your Facebook Ads Been Getting More Expensive? 

If you’ve run any social media advertising since 2018, you’ve likely been impacted by GDPR. The majority of digital advertising platforms essentially operate as an auction house: companies “bid” against each other for the opportunity to serve their ad to a user. The more advertisers bidding for the same user, the higher the bid has to be to “win”. As the demand for Facebook Ads increases, so will the "bid" to serve your ads. In fact, Facebook reported a 31% increase in ad revenue in 2020 from 2019.

One way companies get around this today is by choosing more specific targeting parameters, decreasing costs by narrowing the field of competing bidders AND increasing their chances of conversion by serving ads to users more likely to convert based on behavioral trait assumptions. However, with GDPR and other data privacy initiatives  limiting the ability of tech companies to track and store user data, you’re already seeing a reduction in the quantity and quality of targeting options available.

This has driven average CPM (a.k.a. how much it would cost to serve your ad to 1,000 users) up while simultaneously bringing conversion rates down. Without the ability to capture data through third-party cookies, ads have become more expensive as platforms no longer have ways to be effective with targeting.

For example, let’s say you have a $1,000 ad budget to help you sell a new piece of merch, and you make a $20 profit on each item sold. If you used that full budget on Facebook ads in 2020, based on average CPM and conversion rates, your $1k budget would reach 80,600 potential customers, 56 of whom would go on to purchase for a total of $1,120 in revenue and $120 in net profit after you deduct the cost of the ad spend. That same campaign one year later, based on 2021 CPM and conversion rate data, would reach 66,540 users, 47 of whom would convert, generating $970 in revenue and coming out to a $30 loss! Industry average numbers have not yet been released for 2022, but if the trend from the prior year were to continue, a 2022 campaign could potentially net a $220 loss!

Facebook Budget: $1,000
Product Value: $20

Facebook 2020 Facebook 2021 Facebook 2022
CPM $12.41 $15.03 $18.20
CTR 0.89% 0.93% 0.97%
CVR 7.75% 7.56% 7.4%
Revenue $1,111.90 $935.67 $787.37

Sources: 123 2020 & 2021 CTR and CRV rates are from here.

Adjusting to the Changing Digital Ad Marketplace 

You can either raise prices to cover the higher advertising costs (and risk losing fans in the process) or you can market smarter! This is why investing in your first-party data collection is more important than ever for the long-term wins that drive conversions and delight fans!

As the world moves towards a cookie-less future, artists will need to lean heavily on their zero and first-party data to reach the fans that are most engaged. But, a pain point many teams will face when collecting this data is creating a single source of truth where they can leverage their data for growth. Pulling from disparate data sources can be overwhelming and time-consuming. 

To simplify the management of your data, you will want to implement an all-in-one data solution that unifies and enriches your fan universe. Mandolin’s Fan Pages and Fan Navigator provide the tools to capture important information from your fans (email, zip code, phone number), unify that data across all of your different channels, and use that data to create effective, segmented marketing campaigns. Through simple one-click or email integrations, platforms like MailChimp, Klaviyo, HubSpot, and Shopify are uploaded to Fan Navigator building rich, robust fan profiles giving you a holistic 360° of your fans. Or you can opt for Excel or Google Sheets if you’re a formula whiz and have the time for messy manual data-entry.

If that sounds like a lot, don’t worry: our team is here to guide you along every step of the way. Reach out today to learn more and start your 30-day free trial here.