Kelly Liyakasa contributed.
What a month for Facebook's ad business.
Late Thursday and early Friday, Facebook signaled plans to serve more ads to nonusers on its Facebook Audience Network (FAN). The company also moved to shutter two other ad tech components: its LiveRail exchange (parts of which had already been sunsetted) and its Facebook Exchange (FBX) retargeting pool.
And earlier in May, Facebook said it would extend FAN to include more video geared to brand advertisers, as well as desktop ad placements.
Taken together, the rat-a-tat moves suggest Facebook has centralized its ad tech ambitions within FAN.
According to Andrew Bosworth, VP of Facebook’s ads and business platform, the company hopes to use its interest-based data to target ads to lookalike audiences who don’t have Facebook accounts. It also hopes to use its "like" button to serve ads based on the content that engages people.
Bosworth noted that Facebook already has the technology in place to understand how different audience interests relate to each other. “But until we start using that data, we won’t be able to try it out,” he said. “It’s still very early and we still have open questions on how this will proceed.”
The timeline for Facebook to execute on this promise is also up in the air. Right now, the company is having discussions internally and going through a user notice period.
“Afterward, we’ll be able to look at this data and see what the opportunity is,” Bosworth said. “It could be operational very soon in some cases where we have a lot of information signal. Over time, the use cases where we can provide a better ad experience will grow – but the rate and the timeline where that will happen is very uncertain.”
That Facebook wants to target nonusers effectively blows up FAN’s addressable audience by adding all the people visiting FAN-affiliated sites who aren’t part of the approximately 1.5 billion Facebook account holders. Exactly how many consumers Facebook’s initiative opens up – non-account holders who journey through the FAN network – is still unclear, as Facebook is just beginning to plumb the data to see how big that newly reachable audience is.
Also still to be seen is what type of demographic FAN’s expansion will activate. Could this be a method, for instance, of getting more teens or millennials into the Facebook fold?
“From a demographic perspective, we’re likely to find a very diverse group of people who for one reason or another haven’t chosen to have a Facebook account,” Bosworth said. “I don’t know if there’s anything broadly descriptive you can say about that audience.”
He also shrugged off the possibility of opening up Facebook inventory to more fraud.
“This doesn’t change our risk profile from a fraud perspective,” Bosworth said. “We have industry-leading tools in terms of providing real advertiser value and giving publishers the feedback they need.”
Another likely group are children under 13, who are big mobile users – of gaming apps in particular – but who are not eligible for Facebook accounts.
Regarding the privacy implications of extending its reach with that group, a spokesperson said, "Facebook does not offer services directed to children under the age of 13. Likewise, advertisers that use our advertising tools agree not to transmit information to us when they know or reasonably know that the individual is under the age of 13. We offer websites using our plugins a way to signal to us that they are child directed, so that we can honor COPPA compliance obligations."
LiveRail: Going, Going, Gone
Facebook is also shutting down video SSP LiveRail and trying to move its publisher clients onto FAN (as well as attract video publishers who weren’t LiveRail users). It has sought to entice those publishers with a raft of new brand video ad formats, as well as the promise of valuable user data.
“Facebook has amazing audience data,” said a video publisher source. “They know who you are and [want to combine that] with what you’re watching when you’re not on-network. That’s really powerful because they can begin to target and provide full comfort around the quality of the view as they think about expanding off of Facebook owned-and-operated.”
Although LiveRail historically provided SSP clients tools like yield optimization and ways to manage their pricing floors, Facebook is less interested in that particular value proposition as it focuses more on FAN.
Elements of Control
Facebook’s three announcements this week – the expansion of FAN and the shuttering of LiveRail and FBX – highlight a company eager to consolidate its supply and demand in an environment where it controls inventory access.
A comparison with FBX – the soon-to-be-discontinued desktop RTB integration – is illustrative here.
“I’d say the FBX was the open approach, and the opposite is the Facebook API, which is in certain ways less open,” said Adam Berke, president and CMO of Facebook partner AdRoll.
Certainly FBX was limited and the API integration into FAN gives access to far more diverse Facebook inventory – like mobile, Instagram and video.
“[The API] works better than FBX, even though the functionality might be different.” said Criteo CEO Eric Eichmann. “It requires an investment on our part to integrate with them. And it required an investment on their end to make sure the platform is scalable.”
However, as Berke pointed out, partners plugging into FAN don’t have the user-level visibility they had with FBX, which inhibits their ability to do things like frequency capping or create control groups.
But for Facebook, the problem with FBX, said one source with knowledge of the exchange, was that the company didn’t have control over who accessed its inventory and didn’t always approve of bid prices. And while FBX let people bid and buy for the first time on the Facebook platform, it wasn’t making a ton of money.
Consequently, FAN is less of an exchange and more of an ad net.
“I think FAN is more of an ad network model in that publishers opt in and there’s some data-sharing with Facebook and you execute buys in an ad network,” said Tanuj Joshi, senior director of strategic media enablement at MediaMath (an FBX partner). “It’s more of a network model, but I hope at some point it turns around and becomes an exchange.”
After all, an exchange, which pools demand, is more open. And Joshi pointed out: “The roots of our industry are in the openness.”
Bosworth couches Facebook's motives in terms of value – to both buy and sell sides.
“For anyone using the ad platform today as an advertiser or publisher, we feel they’re doing that because they’re getting value,” he said. “We hope advertisers get more value out of the money they’re spending. For publishers, we hope they get more value by improving the user experience, which yields more time spent, and getting larger paychecks.”
For advertisers, the danger is that Facebook’s expansion could create less transparency in an environment already littered with black boxes.
“In the perfect world, we’d have one standardized buying method,” said Berke. “That buying method would work for every inventory source, and that would solve a lot of problems, like frequency capping across platforms. All sorts of layers of complexity would be solved. Unfortunately, that’s not the reality and companies have vested interest in maintaining proprietary standards. And that seems to be the path moving forward in the near future.”
One source said Facebook's growth creates more opacity for marketers. Marketers want to chain their ad buys together to get that fabled 360-degree view of the customer. “And Facebook,” said the source, “is where your chain breaks.”
But partners are also aware that Facebook’s policies aren’t set in stone.
“The reality is, nobody knows how this is going to turn out,” said Julian Baring, North America GM of ad platform Adform. “There’s a degree of uncertainty. Facebook will test the waters and will course correct where necessary.”