Facebook's announcement last week to allow real-time bidding (RTB) of impressions on the right rail of the site was big news, but many people immediately discounted the move. In their opinion, the move will have little impact on revenue and nearly zero lift for the stock price.
Personally, I see this as a big win for Facebook, and the move should have everyone from Google to ad networks to publishers just a bit nervous. In particular, two big categories will benefit from this change: retail and financial services. Both categories rely heavily on audience targeting (especially retargeting) to move interested buyers through their conversion funnel.
By enabling RTB, Facebook is now allowing marketers to use their own data to target consumers across the Facebook platform, at a fraction of the price of a typical display exchange. The so called "race-to-the-bottom" has been afoot for a few years now and Facebook's move to open up its inventory for bidding effectively floods the market. Facebook's highly targetable impressions will likely cause a landslide in prices. In essence, this is a direct marketers dream come true. Retail and financial services will likely jump on this opportunity to expand reach at the lowest price, while ensuring their ads are highly targeted.
However, I question, where does this leave the brand? Out in the cold? I think not. This change in policy will have some benefits for them too, as it allows all brands to experiment with various targets and do some sophisticated copy testing. And by leveraging those learnings, marketers will have greater confidence that their brand-based buys are reaching the right audiences. They may also gain the potential to remarket to consumers off Facebook, in more brand-friendly environments (high-impact page takeovers, video, etc.) based on the audience learnings from within Facebook.
So there are benefits for both direct response marketers and brand marketers in Facebook's new venture. I am surprised this move has been written off so quickly. In time, I think it will be interesting to see how various direct marketers adopt RTB on Facebook and how this dynamic and fully-automated buying will impact their overall performance. I also am excited to see how brands leverage the opportunity to take their Facebook learnings and apply them across higher impact advertising formats. As I see it, the transition to Facebook buying will be like that of the California Gold Rush of 1848. Who is going to get the head-start?
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Larry Allen is SVP, Global Platform Sales for Xaxis. He has responsibility for overseeing solutions for publishers including Xaxis for Publishers, Xaxis Exchange, and Xaxis Marketplace globally.
Larry has extensive experience in digital media, marketing, and business strategy unmatched by most standards. Prior to joining 24/7 Media (which merged with Xaxis in 2014), he held senior management positions at cutting-edge digital media companies such as AOL, Viewpoint, Unicast, Yieldex, Real Media, and TACODA.
Larry also ran his own consulting business where he advised many major media companies such as The New York Times, Meredith, 33Across, and Business Insider. He is a frequent contributor to a number of trade publications, blogs, and industry conferences.
A graduate of Clarion University of Pennsylvania with a degree in Business Management, Larry is based in Xaxis' headquarters in New York City.
Follow him on Twitter at @lawrenceallen2.
March 19, 2014