Earlier in the week, Facebook announced the rollout of its new Ad Exchange, which should help boost its rapidly decelerating ad revenue. While the product will mostly continue to target desktop advertising (as opposed to mobile, which is the biggest monetization problem at Facebook), it is clearly something that is valuable to brands. In my view, there's 2 important points here.
Point 1: Facebook's Ad Exchange is not really an ad exchange. It's basically just improved analytics with a real-time bidding (RTB) layer on top.
When websites started monetizing ad inventory in the early days of the consumer web, they would often negotiate with brands to sell premium inventory, but didn't have a way to sell remnant space. Enter ad networks. Maybe no one wants to advertise on the back pages of some random sports blog. But an ad network can take a million of those random blogs, and deliever a targeted audience to an advertiser. Thus, Ad Network X can tell Sports Brand Y "I can get a million sports lovers to see your ad." It's great for the small blog (they sell inventory they couldn't do on their own) and good for the brand (extends their reach). And of course, the network takes their pound of flesh.
The problem is, the networks got too good. By aggregating audiences and selling them at a premium, they were basically arbitraging the disparity of the internet. Ad exchanges began helping the process by becoming a sort of network of networks.
Facebook isn't a true ad exchange, because at the end of the day, brands can only advertise on Facebook itself through the tools, as opposed to throughout the entire web. But who knows, if this takes off, Facebook could extend the offering to the broader internet.
Point 2: RTB is bringing display back.
CPM-based display advertising is seeing a resurgence. As search advertising took over and new engagement-based models sprang up (e.g. Twitter's cost-per-engagement pricing strategies on "follows" and "re-tweets"), display advertising was having trouble finding its footing. But real-time bidding, which allows brands to bid on ad inventory in the split-second right before the ad is served, is driving interest in display again. Essentially an auction for display, RTB is helping display move down the purchase funnel, and take share for search, which up until recently was the de facto option for targeting a purchase-ready customer.
(Oh yeah, and I hope you got the Stanley Kubrick reference in the title)
Point 1: Facebook's Ad Exchange is not really an ad exchange. It's basically just improved analytics with a real-time bidding (RTB) layer on top.
When websites started monetizing ad inventory in the early days of the consumer web, they would often negotiate with brands to sell premium inventory, but didn't have a way to sell remnant space. Enter ad networks. Maybe no one wants to advertise on the back pages of some random sports blog. But an ad network can take a million of those random blogs, and deliever a targeted audience to an advertiser. Thus, Ad Network X can tell Sports Brand Y "I can get a million sports lovers to see your ad." It's great for the small blog (they sell inventory they couldn't do on their own) and good for the brand (extends their reach). And of course, the network takes their pound of flesh.
The problem is, the networks got too good. By aggregating audiences and selling them at a premium, they were basically arbitraging the disparity of the internet. Ad exchanges began helping the process by becoming a sort of network of networks.
Facebook isn't a true ad exchange, because at the end of the day, brands can only advertise on Facebook itself through the tools, as opposed to throughout the entire web. But who knows, if this takes off, Facebook could extend the offering to the broader internet.
Point 2: RTB is bringing display back.
CPM-based display advertising is seeing a resurgence. As search advertising took over and new engagement-based models sprang up (e.g. Twitter's cost-per-engagement pricing strategies on "follows" and "re-tweets"), display advertising was having trouble finding its footing. But real-time bidding, which allows brands to bid on ad inventory in the split-second right before the ad is served, is driving interest in display again. Essentially an auction for display, RTB is helping display move down the purchase funnel, and take share for search, which up until recently was the de facto option for targeting a purchase-ready customer.
(Oh yeah, and I hope you got the Stanley Kubrick reference in the title)
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