Google was supposed to uproot digital advertising's foundation. But Facebook may beat the search giant to the punch.
Confirming what has become advertising's latest worst-kept secret, Facebook said it will begin applying its user data to ads shown outside the social network through a retooled version of Atlas, the ad server it acquired from Microsoft in 2013 that sends the actual ads to a publisher's site or app and measures their performance.
This isn't Facebook's long-rumored ad network, though it could lead to one. Facebook has built an automated ad-buying tool -- commonly called a demand-side platform, or DSP -- that advertisers could use to buy ads outside of Facebook through real-time auctions, as The Information previously reported. But the product is in its "very early" stages, according to Facebook ad tech head David Jakubowski, declining to say when or if the company plans to officially roll out the ad-buying tool.
What Facebook is now introducing with Atlas, however, may have bigger and more immediate implications for digital advertising: It is converting its user data into a sort of Rosetta Stone that can bridge the divide between desktop and mobile as well as assure advertisers that their ads were shown to the intended audience, according to the company.
Facebook has rebuilt Atlas so that it can customize an ad's creative including so-called "native" ad placements based on Facebook user data like age and gender, as well as advertisers' customer data that can be matched with Facebook users through Custom Audiences. Custom Audiences is a Facebook tool that uses a process called hashing to match an advertiser's list of customers' email addresses or phone numbers with Facebook user accounts containing the same information.
Advertisers are charged a fee for each ad impression served using Atlas, in addition to the cost of the media they buy.
"The reason for this being so interesting is Facebook is really going to deliver real first-party data about actual people on an unprecedented scale from what we've seen before," said Omnicom Digital CEO Jonathan Nelson. "That in turn should allow us to connect those actual people across devices. The mobile stuff here is huge. And it will allow us to do better attribution across all different types of media and make our messaging that much more effective."
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Omnicom Media Group has signed on the first agency holding company to use Atlas for ad serving and measurement, as Ad Age previously reported. Omnicom clients Pepsi and Intel have been testing Atlas and will be the first brands to transition to the retooled ad server.
For those unsure how an ad server like Atlas works, Facebook's Mr. Jakubowski offered a layman's explanation using The New York Times as a hypothetical example:
"The New York Times has an ad," he said. "It decides the ad is going to go to Pepsi because Omnicom has negotiated that buy with The New York Times for Pepsi for all the strategic reasons that Pepsi cares about. [Omnicom] calls Atlas to send over that creative. Atlas looks at that user and says, 'Hey, do I know anything about this? Is it a person?' And it uses that Facebook map because Facebook knows who you are and says 'Yes, it is' or 'No, it isn't' or 'Don't know.' Those are the three options. In the event it says yes, it says 'Is there any optimization to be done with this Pepsi ad? Is there a blue Pepsi ad for boys and a pink Pepsi ad for girls? Are there any differences between the age buckets?' That's how it uses the actual people identity."
After an ad is served, Atlas can tell the advertiser how many of its ads were served and what percentage of those impressions were served to which demographic groups. Since Atlas is able to tie those impressions back to Facebook's user base, the audience-based reporting is based on actual people.
That "people-based measurement," as Mr. Jakubowski termed it, is a step beyond the educated guesswork that currently dominates digital advertising. Digital advertising has relied on tracking mechanisms called "cookies" that infer things about a person based on their web browsing behavior. In a cookie-based world, a web browser that visits a lot of sports and men's clothing sites is assumed to be male, and a web browser that primarily checks out sites appealing to teens is assumed to be a teen.
But cookie-based assumptions can be wrong, and they can't follow a consumer from laptop to mobile browsers. Cookies don't even work in mobile apps.
Google had explored developing a cookie replacement last year but has since quieted those plans in favor of connecting mobile web cookies and mobile app identifiers for ad targeting and measurement. Facebook has gone a step further by bringing desktop web into the fold. By cross-referencing the ads it serves and measures with Facebook's user base, the retooled Atlas can check that it has reached the right target in three different venues: desktop browsers, mobile browsers and apps.
Atlas's ad serving and measurement will work for its clients across Facebook as well as ads served on its photo-sharing app Instagram. Additionally Facebook has signed deals with "major [mobile] apps representing 50% of all time spent outside of Facebook," Mr. Jakubowski said. He declined to say which apps specifically.
Facebook has also signed deals with "major [ad] exchanges and major ad networks," according to Mr. Jakubowski, declining to elaborate. He wouldn't say, for example, whether Facebook has a deal to serve and measure ads sold through Google's ad exchange or mobile ad network. Atlas is considered the cornerstone of Facebook's strategy to compete with Google's DoubleClick ad-tech suite, which is the dominant digital advertising toolset.
When Facebook announced it was acquiring Atlas, former agency exec Darren Herman raised the question others had voiced privately of whether the deal would be good for advertisers. "Wouldn't you want an impartial 3rd party to be your ad serving tool?" he asked in an op-ed published by Ad Age. "Why would you rely on a media property that is going to make more money off media than ad serving to deliver you your attribution models?"
Mr. Jakubowski said Facebook has come up with an answer. Under Atlas's terms and conditions, "Facebook doesn't have the right to use advertisers' data," he said.