Facebook Just Changed the Mobile Web Landscape With Header Bidding

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Credit: Chris Ratcliffe/Bloomberg

Facebook just executed what might best be described as a digital advertising coup against rival Google and its DoubleClick empire.

The social media power said Wednesday that it's bringing advertiser demand from its Audience Network to mobile web publishers that use header bidding.

Mobile publishers have been able to tap demand from Facebook Audience Network until now so long as they didn't use header bidding technology, a system that allows them to take bids from multiple buyer pools all at once. But if they wanted to capitalize on header bidding, they had to forgo any demand in FAN.

Now publishers that use header bidding and want to tap advertisers coming through the FAN can do so through Facebook technology partners Index Exchange, Sonobi, Amazon Publisher Services, AppNexus, Media.net and Sortable. They can also access FAN through open-source solutions PreBid and PubFood, the company said.

Publishers like the Washington Post, Daily Mail and Forbes have been quietly working with Facebook to introduce the offering, which gives them the ability to plug into FAN and receive ads bought through Facebook's sophisticated data and targeting technology.

"This means we're going to be putting our demand into other partners as the first option," said David Jakubowski, director of publisher solutions at Facebook. "We're not releasing a tech platform, we're not coming out with a new methodology on header bidding."

Big picture, Facebook's move is poised to change much of the media landscape.

Google's Doubleclick has already embraced header bidding. Now it's likely that wherever Google is, Facebook will be there, too. The cost to buy ads on the mobile web will almost certainly go up as broader simultaneous bidding grows. And programmatic's so-called "black box," where publishers get stiffed on ad spend and marketers don't know where their ad dollars actually go, may finally meet its demise.

"The introduction of Facebook's real-time demand is forcing all exchanges to step up their game and increase the yield they offer publishers," said Drew Bradstock, senior VP of product at Index Exchange. "This will accelerate the death of standard tags which are offering publishers far less transparency and yield than they expect."

Header bidding allows all demand sources to get the same information at the same time. It also means everyone bids at the same time, often increasing revenue for publishers. It has increasingly displaced the so-called waterfall approach, which saw publishers take bids from one promising pool of buyers then another in sequence, stopping at the first acceptable offer.

With header bidding, ad space also goes to whoever is willing to pay the most and what they offer is what they pay. There' s none of the arbitrage or "secret auctions" that ad-tech providers sometimes slip into the systems that publishers use, Mr. Jakubowski said. Mr. Jakubowski, citing early tests, said publishers that integrated Audience Network header bidding saw increases in revenue of 10% to 30%.

"Publishers are surprised at how simple the mechanics actually are," Mr. Jakubowski added. "How this works is a big departure from the historical ad-tech stacks. They're surprised at how simple it is and how much control they have to take back their inventory."

Mr. Jakubowski argued that any increase in ad prices won't hurt advertisers as much as that suggests, saying the additional ad dollars going to publishers will come from marketers not paying a so-called ad-tech tax.

"When one party controls all sides of the business, they'll charge a fee on the demand, a fee on the supply and sometimes they'll run multiple auctions," Mr. Jakubowski said. "And they'll run multiple second price auctions that suppresses pricing, that roll over into another auction that will have a higher price winner, but they'll keep the margin."

"It's time to evolve," he added. "It is time to simplify and eliminate all the nefarious things that ad tech has built a bad name on. It is a healthier for the industry. And we'd love to see it across all formats."

Although it's relatively cheap to buy ad inventory on the open mobile web today, it's almost certain that will change in the near future.

Although making advertising revenue on the mobile web is difficult for publishers, that's mainly because Facebook itself captures most of those ad dollars. With a huge surplus of inventory and really low CPMs, the economics becomes simple: Facebook's demand alone will force mobile web prices to go up.

"The role of competition in market dynamics is well established," said Michael Connolly, CEO at Sonobi. "The ad inventory market is no different. This significant influx of mobile-specific demand has the potential to have a seismic impact on the value of publisher inventory in what has been a historically under-performing mobile channel."

Mr. Jakubowski said Facebook is approaching its latest move "mobile first." But the company is also testing connecting FAN and header bidding for deskptop video -- the only area seeing growth on desktop.

"It's small, and it's emerging," he said. "And we're watching that ecosystem develop."

Meanwhile, Facebook said it's actively looking for partners to bring its Audience Network demand to apps.

"Our partner program bridges across all formats," he said. "And today we're coming out and launching this, yes, it is primarily mobile web today, that's what's most mature, but we're actively seeking partners across all formats, especially app."

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