Facebook And Microsoft Are Working On A Deal, And It Could Change Everything About Advertising
Facebook and Microsoft are working on a deal that, if completed, would put Facebook one huge step closer to launching an ad network that could rival Google's in size, and change the way advertising is done online forever.
Context & Ripple Effects
This rumored deal would rewrite a relationship that dates back to 2006, when Microsoft won the right to provide and sell ads on Facebook and then beat out rivals for a stake in the company. Facebook has flirted with off-site advertising before — its 2007 social ad network plans never scaled into a Google-class business — so the reported talks suggest a second, more serious attempt.
First-order effects
- If completed, the deal would give advertisers access to Facebook's social-targeting data on inventory beyond Facebook itself, turning Microsoft from Facebook's exclusive outside ad seller into its distribution partner for an off-site network.
- Facebook gains a route to scale its ad business against Google without building its own sales footprint overnight, while Microsoft gets premium social data to bolster its advertising stack.
Second-order effects
- Google faces a credible challenger pairing the web's largest social graph with Microsoft's advertiser relationships, pressuring the economics of its display business rather than just its search franchise.
- Publishers and other ad exchanges would see a new large buyer competing for their inventory, likely lifting floor prices and forcing intermediaries to differentiate on data rather than reach alone.
Third-order effects
- A working Facebook-Microsoft ad network would mark the shift of online advertising's center of gravity from search-intent signals to identity and social-graph data, with whoever controls user data capturing the margin.
- It would also entrench a two-bloc structure — Google versus a Facebook-Microsoft axis — in which partnerships over data access, not individual products, decide competitive standing.
The trend: Online advertising is consolidating around companies that own user-identity data, as social platforms pair their graphs with established distribution partners to challenge Google's search-driven model.