How Facebook’s Mobile Ad Network Could (Finally) Upend A Backwards Industry

By understanding our tastes and habits, Facebook could steal billions of dollars in ads from traditional media and get Madison Avenue out of the stone age.

How Facebook’s Mobile Ad Network Could (Finally) Upend A Backwards Industry
[Image: Flickr user Kullez]

Facebook has never been a company lacking in foolish ambition–witness Facebook Home, Beacon, Places, and other monumental undertakings. But Facebook has shown restraint in one area: opening up its rich demographic data to third-party publishers.


Instead, Facebook has focused on assembling a proprietary advertising tech stack to optimize News Feed, and the sponsored content in it. Wall Street likes that, but now investors are asking if Facebook can monetize its data even more without compromising user experience and user trust. And that means creating an ad network of its own.

If investors are ready, app developers are too. “I don’t know any mobile developer for whom advertising has been a sustainable source of revenue,” says Amanda Moskowitz, founder and head of the NYC Mobile Forum.

Testing The Waters

Back in 2012, data suggested that the mismatch between mobile usage and advertising spend represented a $16 billion opportunity in the U.S. alone. Since then, mobile usage has continued to explode: For Facebook, monthly active users who accessed the platform only through mobile doubled from 2012 to 2013, reaching as high as 254 million in September 2013, according to the company’s latest quarterly filing.

Facebook has been assembling the building blocks in fits and starts since June 2012, when it first ran ad units in partnership with Zynga alongside FarmVille and other games.

Then, in September 2012, Facebook began testing an advertising network. The pilot added a layer of demographic targeting based on Facebook user data to a network of existing mobile exchanges, delivering banner and interstitial ads on iOS and Android apps, as well as mobile websites.

But three months later, Facebook tapped the brakes. According to a company statement, the pilot was a success, but not a short-term priority: “While the results we have seen and the feedback from partners has been positive, our focus is on scaling ads in mobile news feed before ads off of Facebook. We have learned a lot from this test that will be useful in the future.”


For the next nine months, Facebook developers were heads-down focused on perfecting Facebook Exchange, which enabled advertisers to run retargeting campaigns, and mobile app install ads. By September 2013, both of those ad models were hitting their stride–bringing in more direct response revenue in that time period than the last couple of years combined–and the company returned to the project of building its own ad network.

When Twitter announced in mid-December that it would be offering native ads to any app publisher, through its MoPub ad exchange, it was time for Facebook to counter with its next move.

Diving Into Mobile–And Beyond

In many ways, winning mobile is just the beginning. The real prize in this contest between Google and the major social publishers is cross-device attribution, or the ability to track users as they move between mobile and desktop, and increasingly between any object that bears an imprint of your identity.

“There’s a tremendous value to understanding people,” says Taylor Davidson, a director at kbs+ Ventures. “If Facebook is able to provide a logged-in view of a user across devices? Not many people can do that.”

With advertisers looking for one-stop buying solutions complete with performance data, it’s no wonder that Facebook and Twitter are racing to pull together the pieces.

What’s at stake? Imagine a scenario as simple as buying a candy bar at your neighborhood drugstore. If you use a loyalty card linked to your email address, and you use that same email address for your Facebook account, advertisers can connect a page view to a purchase. Offering that data will unlock billions in brand advertisers’ budgets, dollars that until now have remained in more traditional media. In a sense, Facebook’s biggest competition is television, not Twitter.


But compared to the networks, Facebook in particular has “a structural advantage when it comes to doing what a CMO wants, which is delivering the right message to the right person at the right time,” says Jesse Pujji, CEO of Ampush, one of Facebook’s 14 Preferred Marketing Developers.

Combine that structural advantage with performance data, as a Facebook ad network can and surely will do, and the company could be well on its way to rivaling AdSense in its dominance.