Speculation has been high for some time now that Facebook will expand its advertising network beyond its own properties. At the current time, there are only a handful of online advertisers with enough reach to attract premium priced bids from advertisers. Should Facebook enter into the fray, it would likely have a significant impact on the rest of the online advertising world.
While advertising would undergo a bit of a change, Facebook would be impacted significantly, likely for the better. Here is how:
Solving Revenue Concerns
It is no secret that Facebook’s IPO did not go according to plan. The stock debuted at $38, briefly rising, and eventually falling to its current price of just over $27 at the time of this writing.
Investors have been concerned over an apparent lack of options when it comes to raising revenue from Facebook’s expansive user base. With over 1 billion users, and over 500 of those logging in at least once a day, Facebook only earned $1.26 billion in Q3 of 2012. What it comes down to is that Facebook has to find ways to increase their earnings to quiet concerns from investors. With a reluctance to place more advertising on pages and their “promoted posts” option being met with resistance and anger, the logical step is to move into third party advertising, which this deal would help them accomplish.
The Facebook Advantage In Advertising
What many users have failed to notice is that Facebook knows so much about their users because their users tell them this information. While Google and other ad networks have tracking cookies to monitor recent internet activity, Facebook has all of the personal information a user shares within their own network. Those who use Facebooks App Center understand how well the network knows them.
That provides a very powerful position for Facebook. Just the potential to personalize ads based off of this information would certainly make their advertising platform extremely attractive to advertisers. While some users get their promotion by buying Facebook likes from third parties, the ability to drive extremely targeted traffic should increase the return on investment, so long as ads are reasonably priced.
Cost Effectiveness vs Original Technology
Finally, Facebook has a decision to make. Do they want to build their own third party advertising technology?
Building their own platform allows Facebook a sense of secrecy and control that may not be present if they buy Microsoft’s Atlas Solutions. On the other hand, Facebook would save significant amounts of time, and possibly money, by investing in Atlas Solutions in order to launch their advertising service in the relatively near future.
At the moment, it is impossible to make an accurate prediction, but it would make sense to believe that Facebook is more likely to buy Microsoft’s Atlas Solutions than not. Since Microsoft has been trying to sell Atlas Solutions for years, it is safe to assume that Facebook would get a much better price than the $6 billion original price tag. When looking at what the advantages are to getting a third party advertising technology in place quickly, it makes perfect sense to believe that a deal should not take long to complete, so long as the price is right for both sides.