Facebook Throws a Coming-Out Party for Its Ad Exchange
Mark Zuckerberg says Facebook is going to make a lot of money from mobile ads. In the meantime, the company is trying to figure out how to make more money from the Web ads it already sells. — Here's one way: Take the small …
Context & Ripple Effects
The exchange debut answers a complaint advertisers have voiced all year: in May, CNET reported buyers were practically begging Facebook to take their money and finding the process closed and manual. Opening inventory to real-time bidding is the structural fix for that frustration.
It also rounds out a monetization arc that began with Facebook's 2009 advertising experiment and its first planned foray into mobile ads last December. Zuckerberg used the event to point at mobile as the future revenue engine while the exchange squeezes more from the Web ads already being sold — and the pickup across Business Insider, Adweek, Marketing Land, Triggit and TellApart shows the ad-tech trade, not just the tech press, sees this as its story.
First-order effects
- Advertisers and demand-side platforms such as Triggit and TellApart can now bid on Facebook's Web inventory in real time, converting the take-our-money frustration into self-serve access.
- Facebook gains a second revenue path on inventory its own sales force doesn't sell directly, without waiting on the mobile ramp Zuckerberg promised.
Second-order effects
- Rival display channels and exchanges now compete against Facebook's logged-in user data inside an auction, pressuring them to match that targeting or discount around it.
- Pricing on Facebook's unsold Web impressions shifts from rate-card negotiation to market-clearing, which should lift yield on inventory that previously went unsold.
Third-order effects
- If the exchange model holds, Facebook's business tilts from a direct-sales ad operation toward programmatic infrastructure, with its user data functioning as a pricing asset inside third-party buying tools.
- Opening targeting data to outside bidders sets up the privacy-and-data-use scrutiny that has followed every expansion of Facebook's ad machine since its 2009 experiment.
The trend: Social platforms are turning closed, sales-sold ad inventory into programmatically traded marketplaces, making user data itself the commodity being priced.