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Facebook to build Google Doubleclick rival as battle between tech titans intensifies

By Seb Joseph and Jessica Davies

Facebook

Facebook is turning up the heat on Google as it prepares to launch its own internal demand-side platform (DSP), letting advertisers bid on highly targeted ad inventory directly off Facebook rather than via independent DSPs.

The move marks the social media giant’s ongoing strategy to tighten its grip on the advertising market and fortify its ad server Atlas to better compete with Google Doubleclick.

The social network currently has an ad exchange – FBX – powered by independent DSPs, through which advertisers bid on ad inventory that retargets users based on their past online browsing history.

FBX, which launched in 2012, later opened it up to Google’s DoubleClick ad buying software, letting clients buy retargeted ads on Facebook.

Question marks remain over whether it will maintain FBX in its current form. A Facebook-owned DSP calls into question its relationship with its existing DSP partners. However, The Drum understands the social network has not yet informed all its current partners of its move, with executives from multiple providers adding that they had received no official notice.

An internal platform would have no significant bearing on its relationship with Facebook, adding it would most likely run alongside FBX, according to a senior source at a DSP.

Facebook’s decision to ring fence its programmatic inventory ultimately amounts to a sales play with it looking to command the biggest ad deals in a market where advertisers are favouring those media owners able to offer the biggest reach across the most channels. The sheer breadth of information available on users now has got advertisers salivating at the possibilities of what the industry dubs “people-based marketing”.

Chris Pearce, joint chief executive of TMW, said the “inevitable” DSP from Facebook would exploit this demand for sharper targeting, creating “viable” competition in the long term. The launch marks somewhat of a u-turn from Facebook a year after it added Google’s Doubleclick DSP to its exchange, further highlighting the speed at which the social network display offering has grown over the last 18 months.

“The big lure for brands [to Facebook’s DSP] will be firstly, the possibility to track users across devices via unique user ID's, which will work better than cookies on mobile display,” said Pearce. “And secondly the potential to synthesise CRM and transactional data with ad engagement data. A rich promise, but we will have to wait to see the reality.”

The promise of untapped revenues from personalisation at scale has sparked a rush from the likes of Facebook and Twitter to erect walled gardens around their expanding offerings as they look to limit the amount of information they have to share with one another, a move that could force brands in the longer term to nail their colours to the mast of their preferred digital media owner.

While Facebook’s display offering still trails Google’s own by some margin in terms of targeting capability, it is understood that marketers are willing to overlook the shortcoming due to the potential rewards to be reaped from its bulging mobile user base. At a time when companies spend millions companies shifting data from one ad platform to another, Facebook is looking to secure the bulk of the digital ad pot based on its ability to tether Facebook IDs to their DSP.

Paul Mead, VCCP Media founder and managing director said the move signals Facebook’s plans to “catch up” commercially with Google, having excelled at its mobile proposition, which has given it a mobile advantage but not a commercial one.

“Facebook is striking back. Mobile has been massive for them, and for Google, but particularly Facebook. That plus the level of audience data it has, alongside Atlas, and Facebook Premium videos – which essentially is their equivalent to YouTube – puts them back in the race,” he said.

The exact date of the launch is yet to be determined, although some industry sources had expected it to be before Christmas, while others have predicted it will be in the first quarter of 2015.

Regardless, its swift rollout is necessary if it is to seize advantage of the current opportunities, before its audience is depleted, according to Mead.

“There is evidence to show that people aged under 25 years old are leaving Facebook. So there is a need for them to monetise the inventory as much as possible. So it’s important it can launch it before it leaks more of its audience to other platforms such as Snapchat,” he added.

Facebook acquired Atlas from Microsoft last year, and has since then rebuilt it from the ground up, introducing cross-device targeting and offline sales tracking.

It later poached Google’s director of global strategic partnerships Damian Burns to run the global sales of Atlas.

Marco Bertozzi, president of Audience On Demand, EMEA and North American Client Services for Publicis-owned VivaKi, said the creation of Facebook’s in-house DSP continues the trend of major tech players creating walled gardens around their inventory, with Yahoo and AOL both making moves to ring fence their inventory. It is what fuelled Facebook’s acquisition of Instagram and What’sApp as well as its charm offensive on publishers.

“The big tech players don’t really want to share anything anymore so are putting up walled gardens…registered user data will be the new cookie.”

Meanwhile the move could help simplify the increasingly fragmented DSP market, according to Bertozzi.

“There used to be a utopia where you could log in to one DSP and through that gained access to everything. Now it’s commonplace that you plug into five or six, so it’s gone back to being very fragmented, which is frustrating for advertisers as they got so close to creating that single customer view, and this doesn’t really help.”

He said that data management platforms (DMPs) will take an increasingly important role in offsetting this fragmentation, helping stitch together the separate DSPs. Therefore independent DSPs are all turning their focus to providing DMP capabilities so as to evolve in the face of DSP services becoming more commoditised.

Yet restrictions are also arising around the use of DMPs, with Google - whose Doubleclick has arguably been the most open exchange to date - now beginning to block DMP cookies. It is understood Facbook has its own DMP equivalent, but it is yet to be determined if this is to be made open.

Of all the tech players currently in the market Google has the “best stitched together” platform, he added. “AOL doesn’t quite have the scale although it is still a good proposition, but Facebook has the opportunity to take a chunk out of their scale. If the ad-serving platform and DSP lives up to its promise then they will have all the right pieces to be a strong competitor.”

UK marketers will invest heavily in Facebook and Google next year and for the first time their combined revenues are expected to account for over half (50.8 per cent) of all digital spend, nearly £8.06bn, according to eMarketer.

Facebook’s share of the national digital market will reach 7.9 per cent this year, up 5.9 per cent year-on-year and the eMarketer predicts this figure will surpass 10 per cent by 2016. Globally, Facebook’s revenues are tipped to hit $11.35bn by the end of the year, almost double 2013’s $6.99 but still trailing Google’s $43.53 total for the year.

Richard Kirk, communications planner at ZenithOptimedia, said advertising’s charge deeper into automated targeting is creating a “peculiar industry” around DSPs and ad serving tech.

He added: There are several players in space now who say they can combine their suite of tech products to provide media agencies and brands with holistic view of customer and ability to deliver targeted, individualised comms. All of the players in this space are signed up to this story in one way or another. Facebook, Google, Adobe, Oracle to name four obvious candidates.

“As a result, there is a weird situation developing where none of these players is able to differentiate themselves vs the others. Implication of being better at one part of the ad tech puzzle means you are not so great at another part of it. Therefore all players, when you meet with them, insist that their product suites provide an end to end marketing solution. The result is that lots of brands are now approaching us saying that all the major players in ad tech sound the same.”

Facebook was unable to provide a response by the time this article was published.