This is not another ‘fanboy’ press release about how advertisers are able to drive down the cost of their media buying through the Facebook ad-exchange, FBX. The hype surrounding FBX has been executed beautifully by the PR machine at Facebook, and the trade press in the US and elsewhere have lapped this up.

But let's be clear about the FBX proposition: Facebook has not invented new here. There is no new innovation progressing the ad market. This is just another way for the buyside to access tonnage, and we now have even more inventory flooding the RTB landscape. Many will claim that more liquidity is a good for the industry. This only benefits the buyer. It certainly doesn't help the lot of the premium publisher, that now stands to have even less of a chance of effectively monetising through RTB.

Enabling Advertisers To Attribute PI Does Not Equal Improved Performance

FBX has regressed Facebook’s ad strategy. It is now providing the new ad networks of this world (trading desks and managed DSPs) the ability to game PI as much as the networks of old used to. You have to question whether or not advertisers are getting value for money here.

This is an arbitrage free-for-all that will set the display space back about five years. Many advertisers are already ambiguous about the effectiveness of display advertising. And although many studies champion the lift in click based results, we all know that this is a PI dream. If advertisers are questioning the efficacy of a banner that’s barely in view now, what happens when they start seeing most of their RTB budget spent on little boxes?

For Facebook’s part, this is an inspired move. By accessing retargeting demand, they are now able to fill a % of its inventory at significantly higher yields. Up to now, Facebook has been a CPC marketplace with eCPMs around the £0.20 mark – expect this to increase to circa £1. It also potentially moves the Facebook buying out of any team that measures Facebook the same way as search marketing, only on a click. This again should open up new sources of demand.

Many are suggesting that by enabling advertisers to attribute PI, FBX will ultimately deliver better performance. Under any robust, algorithmic driven attribution model, it is likely that FBX will be found out badly: buyers will actually see that it is not driving as much value to advertisers as they were led to believe by their adserver reports. Time will tell, if the "king of native" really drives behavioural change in consumers beyond the click.

Premium Publishers Lose Out Badly

Another horrible consequence of the arrival of FBX is the likely effect it will have on the publisher's business. Budget already gets swallowed up by Google and Facebook, and this is only going to help strengthen Facebook's increasing dominance in display. This should be of huge concern for publishers. Let's be honest what do they stand to gain from this? Nothing.

The challenge for publishers right now is being able to effectively monetise the programmatic opportunity. It is fair to say, for many, RTB has not worked in their favour. The arrival of FBX only compounds the problem of inventory oversupply in the market. Trading Desks will be rejoicing - unless of course you happen to be using one of the unsanctioned DSPs. ATDs now have access to even more cheap, scalable supply.

This is terrible news for premium publishers. Monetising your inventory through the RTB channel will be even more of an uphill task. And how does this impact all the private marketplaces that are springing up? If more spend can be moved to cheaper, more cost-effective supply sources, be prepared to see spend on these private marketplaces reduce. You can forget the premium opportunity everyone has been talking up. FBX is about to take a massive bite out of automated spend, as budget shifts to the cheap dynamic scalable supply on Facebook.

Worryingly, many publishers are actually oblivious to the fact they have been building Facebook’s vast troves of data for some time - the very data that will now be leveraged alongside any first party data in FBX.

Publishers have been distributing content through Facebook for some time. The Guardian, one of the web's biggest publishers, has a widely used reader app on Facebook. This is data leakage of the highest order. This is a real concern if/when Facebook sell off site. Publishers are fuelling Facebook’s ad business, as their own withers and die.

Build Your Own Ad Network To Take Advantage Of The PI Arbing Game

What do publishers need to do to combat this? Build your own ad network. As outlined many times before on this site, if you have a unique audience that differentiates your business, build a network model around it. We called it the Publisher Trading Desk, but discerning readers are right to point out that it is effectively an ad network proposition leveraging the automated channel for scale. The ad network is the proven business model of internet advertising (Google still runs a ten billion dollar ad network). So why not use FBX to your advantage? Partner with a platform that has access and make use of the cheap dynamic inventory like everyone else. Protect yourselves by future proofing your business.

Publishers must also set up their own co-oped exchanges. La Place in France and a pan-Euro initiative across the market's big newspaper publishers are an encouraging start. A tie up of all the uber sales houses in Germany would also make a lot of sense for publishers there. It is now becoming a requisite to lock down premium supply in all markets to ensure some control over dynamic budgets, while conceding the long tail user-generated, sub-prime inventory market to Adx and FBX.

Publishers need to offer advertisers a programmatic premium environment controlled and managed by publishers. Build your PTDs (ad networks) around this exchange. Give first look on inventory to participating publishers. And off-exchange some supply to give publishers a point of difference when they sell into agencies. With prop data and inventory as well as access to FBX and other long tail supply, publishers could build some compelling propositions in the new data-driven eco-system.

FBX is going to make Facebook a lot of money. But it is likely to return the display space back to the dark days of cookie-bombing PI arbing - and its growth will inevitably drive digital publisher's revenue even more into the red. This is ultimately bad for our industry, as it is certainly not in the interests of either the buy or sell side to have one or two companies dominate the media buying budgets in any market.