Facebook made an unprecedented move to partner with ad tech companies - including Amazon - to take on Google
For Facebook, which is often accused by the ad industry of being a "walled garden" that doesn't offer full access to its lucrative data and inventory, the news marks an unprecedented step to build a relationship with the ad tech community.
And it's a huge, unprecedented attack on Google, Facebook's biggest rival for online advertising dollars. Google will take a 33% share of the global digital advertising market, while Facebook will take 16.2%, according to eMarketer estimates.
A quick header bidding primer
(You can find a longer explanation of header bidding and why it came about here.)
Header bidding is a bit of a wonky tech hack, but it has become hugely popular among online publishers in recent years as they look to lessen their reliance on Google's monetization platforms.
Virtually every publisher uses Google's DoubleClick for Publishers to make money from their websites. "Dynamic Allocation" is a popular function within DoubleClick, which allows Google's ad exchange AdX to compete directly with the ads sold by publishers' in-house sales teams for ad slots.
Everyone else in the auction for the chance to serve an ad that takes place as a website loads had to wait for AdX to take a look at the inventory first and cherry-pick the slots it wanted. Often that process meant that ads were sold for a lower price than other exchanges were willing to pay for them.
Header bidding - a piece of code inserted into the header of a publishers' website - allows exchanges to skip to the front of the queue and all get a look at the available inventory at the same time.
Publishers love it because it increases the amount of money they can make from their ads. And ad tech players love it because it weakens Google's monopoly. AdExchanger reported last year that many programmatic-focused publishers who use header bidding saw Google's share of revenue decline from 90% to just 40%-50%.
What Facebook is announcing
Facebook isn't building its own header bidder, but it is now opening up its Audience Network to mobile web publishers who use header bidding technology provided by six suppliers: Amazon, AppNexus, Index Exchange, Media.net, Sonobi, and Sortable. Later down the line, publishers who use open source header bidding wrappers like PreBid and PubFood will also be given access to Facebook Audience Network.
In a blog post announcing the news, Daily Mail US director of programmatic Matt Wheatland said tests of using Facebook Audience Network through its header bidding had seen it increase yield (the amount of money it generates from its ads) by "2X-3X". Facebook itself says its tests show publishers using Audience Network header bidding are increasing their revenues by 10% to 30%.
Asked why some other header bidding vendors were not included in the partnership announcement, David Jakubowski, who leads Facebook ad tech group, told Business Insider companies wanting to get on board need to ensure their services are aligned with these four principles:
- All demand sources get the same information at the same time
- The ad space goes to the source willing to pay the most
- There is no arbitrage, no "averaged" waterfall and no secret auction manipulations by a demand source
- A diversification and stability of revenue for publishers
Last year, Google announced it was testing a product called EBDA (exchange bidding in Dynamic Allocation) to effectively stamp out header bidding and give other exchanges access to its Dynamic Allocation product. However, some ad tech players involved with the early testing of the product were unconvinced it was really an example of Google playing fair in an open auction process, dubbing it a "secret tax" that "requires us to lie". EBDA has been in testing for nearly a year and there's still no certainty on when it will launch.
Asked whether Facebook might consider opening Audience Network open to EBDA when it arrives, Jakubowski said: "It's hard to comment on other people's tech. What I can say is that we are open to working with anyone that adheres to these guidelines to help drive best practice in the industry."