Facebook To Launch Real-Time Bidding Platform For Social Ads

by Trefis Team
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Facebook (NASDAQ:FB) is planning to launch a social advertising exchange for its ad platform which will enable advertisers to bid on ads in real-time. Google (NASDAQ:GOOG) is the largest player in the online advertising space, and has a very successful real-time advertising platform with AdWords. By offering a real-time bidding platform for advertisers with targeting capabilities to reach specific types of users, Facebook is aiming to drive online social ad sales which form a major portion of its overall revenue. [1]

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Facebook will offer both web-based social ads as well as mobile ads for sale through the exchange. It has more than 900 million users and generated more than $3 billion in advertising in 2011. However, advertising revenue growth has slowed down considerably in recent quarters due to growth in mobile usage, which is hard to monetize, and Facebook’s expansion into developing economies which have traditionally seen low ad spends by brands.

The new real-time bidding exchange will enable advertisers to target users based on their past browsing history through Facebook’s cookies, their likes and interests as well as their social graphs. It could be a potential goldmine and may turn around the fortunes of Facebook if it eases the ad buying process and helps increase the effectiveness of the ads. This could increase return on investment (ROI) for advertisers, which would in turn boost the advertising spend on Facebook.

This is exactly why Google is so scared of Facebook and is so desperately trying to push Google+ and grab a slice of the social advertising pie before it’s too late.

We currently have a $33 Trefis price estimate for Facebook, most of which is derived from its social text and display advertising business. It competes primarily with Google, Microsoft (NASDAQ:MSFT) and Yahoo (NYSE:YHOO) in the online advertising space.

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Notes:
  1. Facebook to Debut Real-Time Bidding for Advertising, Bloomberg []
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