Last year, Facebook (NASDAQ: FB) purchased Atlas from Microsoft. Finally taking the wraps off the brand, we can now see what the social network has been up to. On Monday, the social network announced the launch of Atlas, a digital ad network based on Omnicom's display ad platform that uses Facebook user data to serve up ads in a way that tackles "today's marketing challenges." Here's what investors following Facebook stock need to know about Atlas and, more importantly, why it could be a game-changer for the social network.
It's official: Facebook wants in on Google's business
What's so special about Facebook and its new ad platform? After all, doesn't the company already make nearly all of its revenue from advertising? Here's the kicker: The advertising platform enables marketers to use Facebook data for advertising on sites beyond Facebook. In other words, Atlas is positioned squarely in Google's (NASDAQ:GOOG)(NASDAQ: GOOGL) arena.
In the immediate term, the strategic implication here is not that Google should be worried about Facebook. Why should Google fret? Display ads account for only about 7.5% of the search giant's revenue. Google's bread and butter is search ads. And Facebook isn't even close to competing meaningfully with Google in this business. Instead, the most important strategic implication here is that Facebook is increasingly positioning itself as a key player in the display ad business outside the Facebook platform -- a move that opens another door for Facebook to further growth potential in advertising. Yes, this happens to be a business in which Google is a key player, but the new competition isn't something Google should be worried about yet.
Over the longer term, however, a successful Atlas could help Facebook add to the already unique data it has on its users, helping it further enhance its value proposition for advertisers so that it is more competitive with Google. The key word here, of course, is a successful Atlas. Given what a huge and speculative jump this is for Facebook, Atlas will have to be tried and tested before Google should fret.
But it's worth noting that Facebook's unique approach may, indeed, prove to be enticing to marketers. Facebook says the platform will use "people-based marketing." In other words, instead of using cookies, a technology that is rapidly becoming obsolete as users transition to a multi-screen and mobile environment (two worlds that don't give cookies any love), Facebook users -- and the growing amount of data Facebook has on its users -- will serve as the central tracking point for serving up ads. This could be effective since it means the data points that marketers are using to track ads and the end-user target for the advertising are one in the same. And given that Facebook's user base is both large and extremely effective, it's possible that the social network's people-based marketing could be exactly what marketers are looking for in a multi-screen and mobile environment.
The bottom line for Facebook stock investors
While predicting whether Atlas will succeed is likely nothing more than speculation at this point, there is still a key takeaway here for investors: The risk/reward profile for Facebook with the launch of Atlas is incredibly favorable. In fact, Atlas basically only offers upside potential. If Atlas succeeds, Facebook has higher revenue, more data, and a better value proposition for advertisers. If Atlas fails, Facebook can take the lessons learned and apply them to its advertising products on its own platforms.
Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Google (A and C shares) and owns shares of Apple, Facebook, Google (A and C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.