Last April, Facebook (FB 2.11%) purchased some ad technology called Atlas from Microsoft. After a year and a half, Facebook is ready to unveil its advertising platform based on Atlas, according to a Wall Street Journal report based on information from people familiar with the matter. It will extend beyond Facebook's website to third-party sites, like Google's (GOOG 2.25%) (GOOGL 2.01%) ad platform, but it will also work across mobile devices and even be able to track users in brick-and-mortar stores.
The ability to track a campaign is essential for advertisers. How else will they know what works and what doesn't? Facebook's ubiquity gives advertisers the ability to track nearly every Internet user across every device they use. This gives Facebook a big advantage over competing ad platforms.
Who wants a cookie?
Facebook thinks there's something better than cookies (delicious pieces of code that leave a crumb trail of where you've been on the Internet). Advertisers use cookies to show web browsers products they may have expressed interest in already.
But some call a Facebook ID the "holy grail" of expressed interests. Facebook collects a lot of details about its users, and being able to use those details for an ad campaign could be extremely lucrative.
Beyond the demographic details, using a Facebook ID solves one of the biggest problems with cookies: They don't work in apps. Eighty-six percent of time spent on mobile devices is in apps, not the mobile web, according to data from Flurry. That amounts to 2 hours and 19 minutes per day in mobile apps for the average U.S. consumer. Since cookies don't work in apps, this makes it much harder to track what users are looking at on their mobile devices and target ads.
Facebook's app is installed on almost every smartphone and tablet. The company has had a lot of success partnering with app publishers to support logging in with your Facebook ID. This provides some valuable data to Facebook, which it can now use to help advertisers target their products across mobile apps.
Additionally, tracking ads using a Facebook ID allows brands to see how a user came across its product. For example, knowing someone first saw the ad on mobile then made a purchase on desktop can tell advertisers a lot.
If a customer volunteers her email address at checkout in a brick-and-mortar retailer, there's a good chance the email would be linked to a Facebook account. This would give advertisers the potential of connecting in-store purchases with digital ad campaigns on a per-user basis.
Overall, using Facebook ID instead of cookies ought to help Facebook increase the price for mobile advertisements, something Google has been struggling with, but Facebook hasn't had too much trouble doing. (Note that Facebook already tracks ad campaigns across its own mobile and desktop platform.) That's why Google is working on an alternative to cookies as well, but has yet to produce anything.
Balancing supply and demand
At Facebook's annual developers conference in April, the company unveiled a mobile ad network. The goal of the network is to help publishers, particularly app publishers, fill ad inventory with Facebook's ad partners. This puts it in direct competition with Twitter's (TWTR +0.00%) MoPub and Google's AdMob.
Twitter's purchase of MoPub for $350 million last year gave the social network more of presence outside of its own platform. Twitter's smaller user base doesn't give it the pull of Facebook in getting mobile publishers to partner with it. With MoPub, a leading supply side mobile ad platform, Twitter gained inside access to other mobile apps' advertising business.
The Facebook ad network coupled with Atlas could throw a wrench in MoPub's business. Facebook simply knows more about most apps' users than the app developers themselves, which makes it a natural partner for improving ad revenue per user. It remains to be seen if Facebook will open its Atlas platform to MoPub to capitalize on its vast inventory, or if it will try to go it alone and build up its own ad network.
Disrupting Google's $55 billion business
Facebook is still only the second most popular website on the Internet. Google.com and YouTube are No. 1 and No. 3, respectively. But Facebook's user data more be more valuable and accurate than Google's. Additionally, Facebook is able to track users better than Google.
The result could be an ad platform that can target users better across every device. That's something advertisers will pay up for, and could even persuade them to switch from Google's dominant platform.
