20 Years of Facebook: How Mark Zuckerberg Changed the Course of Digital Advertising

Here are four ways it revolutionized digital advertising and four key moments in its history as an ad business. They help us read the tea leaves about what's next for Meta in the AI era.

There’s a lot that Facebook has done wrong over the years, but one thing it indisputably did right was building a powerhouse ad business. Meta is now the second largest company in the world based on worldwide digital ad revenues. Only Google is larger.

I've been researching and writing about Facebook since it was two years old, first as an analyst at EMARKETER (where I founded and led the social media research practice) and currently, as an independent tech analyst. I have a unique vantage point from my many years of covering the company, and my goal with this article is to shed light on what made Meta the company it is today, and what will determine its future in the era of AI.

Four ways Facebook revolutionized digital advertising

1. It popularized the idea of ads that looked identical to the content surrounding them. Instead of ads that stuck out and looked different (like TV commercials look different from the TV shows they appear in), ads on Facebook look identical to users’ posts. This method of making the ads appear “organic” to the content surrounding them ended up becoming the model that most social platforms and many other digital publishers followed in future years.
2. It built an ad targeting system that amassed millions of datapoints about users’ activity on Facebook: the things they posted about, the friend networks they belonged to, the brand pages they liked and more.
3. It paired that internal user data with data on users’ activity outside of Facebook. Advertisers could define highly specific target audiences, and Facebook could deliver ads to those exact audiences and then tell advertisers exactly how many people saw or engaged with the ads. Compared with TV or print advertising, which offered very rudimentary targeting and measurement, this was a gamechanger. In more recent years, this aspect of Meta's ad business has come under intense scrutiny, and its access to that external data became severely restricted after Apple's iOS privacy changes in 2021. But for many years, the ad industry celebrated Facebook for its highly effective ad targeting.
4. It developed a way for ads to look identical on a desktop computer and on a mobile device. It's hard to imagine a time when mobile advertising wasn't as easy as it is now, but in the early 2010s, it was a huge challenge. Advertisers had to create one set of ads for computers and another set for mobile phones. But Facebook made it seamless for ads to appear the same way regardless of the device, and as a result, its mobile ad revenues -- and mobile advertising in general -- began to soar.

Four key events in Facebook’s ad business

When Facebook launched its ad business in 2004, it was hardly revolutionary. Advertisers could buy simple banner ads on Facebook’s site to promote their business to users. There was little to no targeting, and the ads appeared on the side of the page – they were not yet integrated into the feed.

Here are four key moments in Facebook's history as an ad business:

November 2007: Facebook Ads Launch

In 2007, Facebook and Mark Zuckerberg unveiled "Facebook Ads" at a splashy event in New York City. Facebook Ads was a three-part system that allowed businesses to open a Facebook page, create targeted advertising delivered via the “social graph” (the network of connections between Facebook users), and gain metrics about Facebook users via an insights dashboard.

The first iteration of that targeted advertising - a program known as Beacon - ended up a massive failure because it turned users' off-Facebook activities directly into an ad product. (If you bought movie tickets or in one notable example, an engagement ring for your girlfriend, Facebook might send an ad to your friends telling them that. You can imagine how that went down.)

But even as Facebook turned off that controversial ad product, it continued to gather off-Facebook activity via features like Facebook Connect. In the process, it built a massive database of information that advertisers could tap into to deliver targeted ads.

March 2008: Hiring Sheryl Sandberg

Mark Zuckerberg’s decision to hire Sheryl Sandberg as his chief operating officer led to enormous growth in Facebook’s advertising business. When Sandberg joined the company in 2008, Facebook had just $267 million in worldwide ad revenue. Two years later, revenues soared to nearly $1.9 billion, as Facebook started to become a must-buy for advertisers. By the time she left her fulltime COO role in 2022, worldwide ad revenues had rocketed to nearly $114 billion.

Sandberg’s main job at Facebook was to build revenue. She and she and her teams were able to take Facebook’s idea of “social ads” and its nascent ad manager system and turn them into an extraordinarily successful business.

February 2014: The beginning of the end of organic reach

For many years, marketers on Facebook could be fairly confident their page posts were reaching their fans organically. But that started to change as Facebook began a slow but steady throttling of the organic reach of business posts. By February 2014, content posted on brands’ Facebook pages was reaching just 6% of fans, according to a seminal Social@Ogilvy research paper “Facebook Zero: Considering Life After the Demise of Organic Reach,” down from 12% in October 2013 and even higher levels in the years prior to that. The largest brands—those with at least 500,000 “likes”—saw even lower reach, just 2% as of February 2014.

The move angered brand page owners, who had spent several years building up their fan base on Facebook. Adding insult to injury, Facebook told brands that in order to guarantee their posts would reach those fans in the future, they'd need to buy paid ads.

Brands begrudgingly complied, and US ad revenues for Facebook (the company as a whole) ended up soaring from $4.8 billion in 2014 to $24.5 billion in 2018, according to eMarketer's forecast.

Companies haven't stopped posting organically on Facebook, but the decline of organic reach taught them an important lesson: They weren't in charge. Facebook was.

April 2021: Apple’s privacy changes

Meta’s targeted ad business faced a huge setback when Apple made privacy changes that limited the amount of information Meta had access to. The launch of App Tracking Transparency squeezed the massive firehose of data that Meta was able to use in its ad targeting system down to a trickle if Apple device users chose to opt out of allowing third parties to track their activity across other apps and websites.

This reduction in data availability ended up costing Meta billions of dollars in ad revenue. In recent years, Meta has rebuilt its ad targeting systems so they can work without having access to this external data, but the targeting is not nearly as good as before. However, advertisers have largely adjusted to this, and many believe the quality of the targeting is still good enough for them.

Facebook’s legacy in the AI era

After a rough 2022, when Meta’s ad business suffered as a result of Apple’s privacy changes, a poor worldwide economy and pressure from TikTok, the company had a remarkable turnaround in 2023, its “year of efficiency.” Meta enters 2024 in a strong financial position, and because nearly all of its revenue comes from advertising, it stands to benefit from the current worldwide ad recovery.

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But Meta will be tested in 2024 by the rapid rise of AI. It already uses AI to make its ad products better and more efficient, and it is also experimenting with generative AI tools that help advertisers create ads more quickly and easily. However, AI deepfakes and other artificially generated disinformation will test Meta's content moderation capabilities. Meta couldn't stem the tide of bad actors in the pre-AI era. It's going to struggle even more in the AI era, especially as the 2024 US election season heats up.

If Meta ends up having significant problems with AI-generated fake content, that could cause advertisers to cut spending due to brand safety concerns.

However, Meta may also stand to benefit from a new type of advertising: ads in AI experiences. The company has already started testing consumer-facing generative AI features under the Meta AI umbrella, such as chat avatars and an AI image generator. During the Q4 2023 conference call, Susan Li indicated that these chat experiences wouldn’t be a significant revenue driver in 2024, but that in the future they likely will be.

I believe that as AI infiltrates social media in bigger and more defined ways, new ad opportunities lie just around the corner. Follow me for more research and insight into how AI is changing social media advertising.