Facebook’s recent announcement (and you have to use the word announcement lightly) about the launch of its “exchange” could be interpreted in different ways. Below are some of the initial reaction thoughts from ExchangeWire:

- Does it finally provide the industry with a synchronised way of accessing Facebook inventory on the same buying platform(s) as other media buys?
- Is it a knee jerk reaction now Facebook are under increasing investor pressure?
- Is it really an exchange? Are billions of more impressions really needed in the real-time eco-system?
- Is it going to create agency friction and create a land-grab scenario?
- Another cheap way for retargeting companies to make a quick pound, dollar, euro etc?
- How will the algorithm coexist with existing API buyers: the current ‘auction’ process is by no means ‘real time’?
- Google is a notable absentee from this exchange. Is this a sign of the market trying to deal with the growing influence of Google?
- Will trading desks make clients aware of this inventory coming to the marketplace? Will they have to arbitrage and sell on CPC?

Agencies, advertisers and vendors have been lobbying Facebook hard for years that it needs to ‘open up’. It would appear that this move is not the total open strategy the agency's had in mind. Facebook seems to be allowing third party ad serving with some sort of cookie sync. It will certainly enable agencies (and in-house advertiser buying teams) to streamline the workflow of accessing Facebook inventory which to date has required third parties such as the Glow Machine and Adaptly to reduce the friction involved in this process.

Who Owns Facebook Buying Within The Agency?

There will be an inevitable power struggle within the agencies around who owns the Facebook channel now that it is RTB-enbaled.. Up until now, many agencies have established specialist ‘API buying teams’. These teams are still 90% focused (estimate) on Facebook (Twitter, Linkedin, Youtube et al are still fairly nascent in terms of API buying). It represents a massive political change / challenge. API / Facebook buying teams will be reluctant to relinquish ownership of the Facebook prize, but expect the trading desk teams to come streaming in. If this inventory can be accessed via their DSP, it is likely that they will want to migrate buying duties to this team (if they have not merged the teams already).

What Happens To The RTB-Enabled Inventory Passed Back To Facebook?

New demand will inevitably come to the market and ratchet up the price of existing inventory. Retargeting budgets will no doubt flow into Facebook. It will be a quick win for the trading desks and networks built on the approved DSPs. But let’s look at this for a moment. It could be argued that the majority of the campaigns running on Facebook today are already retargeted to some extent. Facebook reaches around 75%+ of the UK online population (depending on which tool you use). The likelihood of a campaign being run on Facebook reached users that have already been to those advertisers’ sites - to either a) abandon or b) purchase - is extremely high. There is the big problem of wastage currently. And this only plays into Facebook’s hands.

This current strategy ensures that it gets campaigns of scale, pumping out billions of impressions. However, if it goes RTB, it will give advertisers the ability to strip out the waste which WILL increase the yields, but only on a fraction of the inventory.

What about the remaining inventory? Will this be then used for those still accessing via the API buying tools on a CPC bidding model? The leftover inventory would also invariably perform worst on a CPC metric, thus making this a redundant tactic for the current Facebook buying community.

The Gaming Of The Post-Impression Metric

Post impression gaming will doubtless be making a comeback now. New supply to ad networks (using the approved DSPs) in the billions, on tiny ad formats, that resemble the buttons of IAB formats of yesteryear is the last thing this industry needs right now. There is already an efficacy confidence problem right now. If pools of advertisers have no faith in display’s ability to make an impact, will they be proven wrong by ads that measure 100x70 pixels? We shouldn’t forget either that the likes of GM have already pulled out of Facebook because they do not believe the ads create value (according to some speculation). Will overlaying data onto the ad buy change this? It is unlikely.

The Downward Pressure On CPMs

Lastly, what happens to publishers? Premium content is already struggling to find value from exchange trading. There is already too much substitution and audience buying has already left a lot of premium content at the front door, adding billions more impressions to the ecosystem could seriously impact publishers here. That said, with the rise of publisher trading desks, maybe this could be as much of an opportunity for publishers as it is for advertisers? Facebook is giving the industry another longtail audience extension opportunity. It would be wise not to be on the wrong side of it.

Update: Since publishing this post, it seems more details have come light (courtesy of Sean Kegelman at VivaKi) which may make some of the points made in this post obsolete. If true, then this roll out of the 'exchange' would seem on the surface to be actually very insignificant and would be hard to imagine the impact it would actually have across the ecosystem. Time for Facebook to go on record and explain all?