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4 months ago

Is FAN, Google’s Biggest Threat? Is this Duopoly Good for Digital Advertising?

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Eric Schmidt, chief executive officer of Google Inc., listen

It’s an established fact that Facebook is a digital advertising apparatus. What many may not know is that in addition to appearing on Facebook, Instagram and Messenger, these ads also appear on platforms beyond Facebook such as other apps and websites.

This occurs via FAN, the Facebook Audience Network, based on audience targeting information computed from data captured while consumers happen to be on Facebook.

FAN’s impact on creating more ad inventory and lowering costs for advertisers is obvious, but it also creates more ways for publishers and app developers to monetize their inventory through new avenues. As a consumer, what this means is you get to see the types of ads you see while on Facebook, when you are not on Facebook. This also implies, your news-feed is not stuffed with too many ads as there is more real estate to spread them across.

Now Facebook has extended FAN to include mobile web pages. In my opinion, this makes it a clear challenger to Google and a pivotal moment for Facebook but not for the reason that it wants to punch Google in the face. See I think this move on the part of Facebook validates the industry while extending it at the same time. I also think it will increase ad rates.

Endorsement of a market and increased competition is salubrious. Google is the reigning emperor of a formidable digital advertising kingdom via it’s DoubleClick product. Opening the floodgates to FAN for vendors like Amazon, Media.Net etc. allows Facebook to transport increasing demand from advertisers to these companies. I can’t even envisage the profound bearing this action on the part of Facebook might have on publisher inventory, packing all this mobile demand into the digital advertising canal system.

As an industry insider I know some of the mainstream publishers have been schlepping away to get this to go live, and now it has. This is a game changer for publishers. In order to explain this, I need to first briefly explain the concept of header bidding.

Put simply header bidding is a way for internet publishers to handle direct auctions via a concept known as simultaneous bidding, an alternative to Google’s advertising waterfall sequence, thus circumventing the inefficiencies that keep publishers from realizing the best price for their ad inventory.

Mobile web publishers use header bidding as a tool to fulfill their inventory. Up until now, these publishers, by virtue of the fact that they were using header bidding, were not allowed to access Facebook’s Audience Network. But all that has changed and these mobile publishers can now access advertisers on FAN through partners such as Amazon Publisher Services, Media.Net, and AppNexus or even through open source vendors like PubFood or PreBid.

Google’s DoubleClick network was already accessible via header bidding. Now that Facebook has opened itself up as well, the increased competition will likely also increase the cost to purchase ads on publishers’ mobile web pages. In other words, digital ad rates will shoot up which I hope is good for the publishers providing the content. It certainly means the biggest fish in the ocean, Google and Facebook are going to get even bigger.

Digital will likely exceed television advertising in the next two to three years and is forecasted to be a $231 billion industry by then. My concern is as ad prices go up, brands will most certainly demand a much higher quality of analytics and tracking which is something that currently only Google and Facebook offer at scale. There is thus a risk of the smaller ad tech vendors getting affected by the change or frankly even destroyed.

Facebook is approaching 2 Billion users. It clearly has scale and relatively good analytics, and can offer ad performance at a level difficult for smaller players to mimic. Only Google is the likely alternative. From that perspective this duopoly can’t be good for the industry especially as ad prices go up and feed their coffers even more. Brands and Publishers will end up with little to no choice other than to participate on either of the two ecosystems.

5 months ago
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