The PostView: Are Facebook And Amazon About To Disrupt The Multi-Billion Euro/Dollar Traditional Display Model?

The PostView is a new coulmn written by senior execs working in the European online advertising industry.

Facebook and Amazon could soon bring massive disruption to the multi-billion dollar/euro traditional display marketplace – with display solutions that could even emerge as a serious threat to current kingpin, Google.

We Need Some Context

The two major themes of audience-led buying presently centre around both intent and social. They are so in vogue right now with the entire industry. We see BlueKai selling shopping intent, and the likes of RadiumOne serving up social targeting. Facebook and Amazon could easily become a major competitor to everyone working in these emerging areas of display.

The truth is, buying third-party data is hard to efficiently scale. It’s why these data companies are trying to create relationships with hundreds of publishers. They need consistent volumes of data with as many touch points as possible to build robust, rounded profiles. Facebook and Amazon are the biggest publishers and owners of data in their respective spaces – and sit on the largest, most diverse sets of user data. Up until now it has not been accessible to marketers and advertisers, but that could soon change.

The Intent-Driven DSP

Amazon has for some time been discussing bringing to market a display-led product. My hunch is they won’t just look at building a behavioural ad network. Like most forward-thinking real-time traders, Amazon is looking at building its own bidder. And why not? As far as infrastructure goes, Amazon is going to be more competitive than any independent DSP is, so why not own their own stack and retain that juicy margin.

So how could this play out? It is likely Amazon will launch an intent-powered DSP. For larger trading desks and independent specialists, Amazon could simply let companies license their bidder. As a standalone bidder, it would be competitive (and pricing/costs could be offset by Amazon already owning its own cloud infrastructure). Throw in access to all of that user intent data and you suddenly have a serious contender in the DSP space. Not every advertiser would see the value of this, but you’d have to expect that the larger retailers would want access. It would be up to Amazon to manage the competitive element of giving away user data to potential competitor retailers.

This could impact the retargeters too. Up to now, the likes of Criteo have been winning the race because of its engineering and technical capabilities. Amazon could easily match this. And then some. Amazon has a scaled predictive/personalisation algorithm. You can just imagine the sales pitch to retailers now: “Yes we can do personalised re-targeting, that’s easy… but the platform also gives the ability to do sophisticated prospecting, modelled from user intent on millions of consumers”. This could well be a huge competitive disadvantage to existing retargeters.

The Graph-Enabled Ad Net

Many of us are sure of two things: 1) Facebook will IPO in 2012 (and it could be in the next eight weeks given that trading has been suspended on secondary marketplaces) and 2) it will take distribution of ads outside of its domain.

It remains to be seen whether this becomes an ad network, a walled marketplace or a social-enabled DSP. To be honest it doesn’t matter right now, what matters is the open graph. Facebook has already assembled a socially connected web. It has a massive distribution of little “like” buttons across millions of publisher sites (thank you very much, publishers!). Up to now it hasn’t really leveraged any of this data. It’s been confined to ASUs. However, marketers have invested billions (four billion to be precise) into these ad units because ultimately they know their audience is there. So what happens when Facebook can tell you where they are outside the FB domain, what they’re doing, and who else they’re connected to? There is likely to be huge shift of budget into this new entity – whatever it’s likely to be.

Will this leave Facebook vulnerable on the privacy front if it rolls out this new solution? Potentially. Up to now consumers have tolerated the ever-changing privacy policy because most of their virtual life is tied up into the site. Facebook has also evaded the clutches of any e-privacy discussion. By signing your life away to Facebook, you’re giving the requisite ‘explicit consent’ that satisfies the new EU privacy laws.

What’s most intriguing about all this is how Facebook goes about executing this long-awaited strategy. It’s currently a walled garden, and I can’t imagine that will change any time soon. The new solution will probably look like Adsense of old. Facebook will not let users anywhere near the data so it could be leveraged elsewhere for free. I just cannot see how Facebook would ever let advertisers third-party ad serve. Advertisers need to be able to track holistically including the infamous post-impression. The compromise? Advertisers and their agencies will likely send their tracking tags to Facebook to embed themselves.

Building The Facebook Display Stack

But why stop just at an Adsense clone? Once it has enough impressions, what’s holding Facebook back from building its own exchange for dynamic demand partners? There has been some speculation of late within the industry of a link-up between Facebook and AppNexus – with the view of building the FB display stack. AppNexus might even be one of Facebook’s big acquisitions post-IPO when it is flush with public money. Not a completely crazy theory. But how would this impact its current deal with Microsoft? Would Facebook’s relationship with Microsoft pacify potential conflict here? Regardless of how this plays out, I will make a bold prediction: Facebook’s revenue in traditional display will soon outgrow those of Google.

A final thought here. Amazon and Facebook could – and most probably will – bring major disruption to the display marketplace, but imagine if they worked together. An integrated partnership that leveraged the best of both the intent and social worlds. You bring this entire stack to the table and it’s enough to own the market. Things are going to get interesting. Again…