Has AppNexus Spotted A Chink In Google’s Armor? Facebook Did.

mattkeiserddt"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Matt Keiser, founder and CEO at LiveIntent.

When AppNexus paid nearly 15% of its total value for Open AdStream (OAS), speculation ran rampant about the motivation. As an entrepreneur and a CEO in this market, part of my job is to speculate and play armchair quarterback when these deals form. This acquisition put AppNexus in a better position to compete with Google and Facebook and, even more important, move the entire industry forward.

Here’s how: A schism has emerged between those putting their eggs in the basket of the cookie and the data-management platform (DMP) as the key to targeting, and those who put their stock in using first-party data to target, which is also known as “people-based marketing,” according to Facebook’s David Jakubowski.

Google adopted the DMP and cookie as their salve. Its embrace of this approach was the safe move in an era when people had one device and used one browser, but it’s now a new world. The average American adult owns four digital devices, according to Nielsen. This is what makes Facebook Atlas so newsworthy. It goes beyond the cookie and enables people-based marketing across device and channel.

Facebook has long been a leader in people-based marketing, and Atlas is Exhibit A of that expertise. Atlas is differentiated from others, including Twitter Tailored Audiences, because it brings the power of people-based marketing from Facebook’s walled garden to the wide-open world of display and mobile advertising. The result is the first truly scaled cross-device solution for brands.

Yet still Google sticks to its guns. Something doesn’t feel right here. And I believe AppNexus is now in position to capitalize – big.

AppNexus’ purchase of OAS gives it an install base with publishers and could force Google’s hand like never before. Many publishers have access to the very same data necessary to build an open translation layer required to power a cross-device and cross-channel competitor to Google. Google’s perceived reluctance to enter the fray, coupled with a prediction of demand from brands for an open platform, may inspire a mass exodus to AppNexus if a solution can be brought to market soon.

AppNexus was already a formidable power in the space, but by aligning itself with WPP demand, data from the WPP’s DMP Turbine and OAS publishers, it could take the fight to Google where Google has resisted so far. The $10 billion question revolves around whether Google will modify its stance now that Facebook has gone whole hog and AppNexus has the potential in place to do so as well.

This looming battle doesn’t augur rocky times for our industry or even the key players mentioned here. Instead, it’s another sign of the cycle of progress pushing forward the industry and raising all boats. The moves by Facebook and AppNexus push Google to give brands what they want: assurance that the right message is reaching the right people at the best time.  We’ve seen people-based marketing campaigns become the fastest growing campaign type because they’re what brands are looking for in a world of infinite choice. This push drives change. While Chrome and Android are brilliant approaches to gathering first-party data, Google does not allow people-based targeting. Does Facebook’s launch of Atlas and AppNexus’ purchase of OAS inspire Google to think about the market differently? Can we expect even more exciting innovation from a company famous for it?

Whether intentional or not, AppNexus may have found a possible chink in Google’s armor. My hypothesis is that, as reaction, Google does not turn the ship quickly. Search is too important: Google makes $54 billion, and only $4 billion from display. The specter of alienating these customers for ad targeting looms too large. Yet even with slow response, Google has an advantage with the quality of its data. The data Facebook has on me is not intent-driven – it’s stuff I like as opposed to data indicating what I’m buying or researching. Google has intent data and it’s second to none, as is its ability to mine the data for intent.

In the end, I believe Google will respond to Facebook and build its own version of a walled garden. Here, the data from brands would exist in an environment like the famous roach motel where it would “check in but never check out.” This creates an exciting opportunity for AppNexus and its publishing partners to build an open solution. Either way, we will see a strong initiative from Google in the coming months that paves the way for it to become a strong player in people-based marketing.

When Google goes that route, I’m sure it can devise for itself an approach that will once again leave the rest of the industry in awe.

Disclaimer: Matt Keiser is also a co-lead at Grape Arbor VC, an AppNexus investor. Neither Matt nor Grape Arbor has discussed the OAS acquisition with AppNexus.

Follow Matt Keiser (@mrkeiser), LiveIntent (@LiveIntent) and AdExchanger (@adexchanger) on Twitter.

3 Comments

  1. Dhimant

    Great post and it would be nice to see Google's move.

    Matt - I have one question on your note about google's approach. I agree that Google lacks peopole based marketing and uses cookies as their salve. However, isn't google using or started cross device targeting? Please correct me if I am wrong.

    Thanks,

    Reply
  2. I don't understand how OAS gives AppNexus anything that they don't already have - and if it did Google would have the much more valuable asset in DFP.

    The reason Facebook can do "people marketing" is because the users are logged in. If I log into facebook on the web, facebook on my mobile, and then I login to countless of other services that use facebook authorization. Facebook knows who I am on every device and can market directly to me.

    OAS doesn't have any of that. OAS is most popular with traditional publishers and when was the last time you logged into a traditional publishers mobile app?

    Any multi publisher solution ends up relying on third party cookies.

    The real people who can compete here are other companies that drive logins cross desktop and mobile like Twitter. This is why Google built Google+ and why Youtube will become an even more valuable asset.

    -James

    Reply
  3. A few things. Firstly I am not sure that Appnexus gave up 15% for OAS. Instead after this deal the total stake reached 15%, very different. The question here is can Appnexus with OAS beat Google and DFP on supply? Cross device data is huge but not really what this deal is all about at all.

    Secondly. I think people over egg Google's data advantage. Yes it is intent driven and a real cash cow in search. However the problem with it is that it largely deals with decisions people have already made. Ie, when you have decided to buy a certain product you go onto Google to help facilitate it. Even Google's ability to influence where you buy it is not as strong as commonly thought. Almost all Google activity is about mining intent not driving it.

    Facebook and other data is different. Facebook is about finding users of a certain type before they make a decision. In the past that has been compromised as the Facebook environment is not universally amazing for advertising. But now they are using their data for advertising beyond Facebook the game is changing. Also FB's cross device data is at least as good as Google's.

    Reply

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