Facebook’s using its muscle to remake the ad tech world

“It’s clear that Facebook is going for a totally walled-garden strategy and abandoning all the real-time exchanges,” said Ari Paparo, CEO of ad tech company Beeswax.

Facebook also made changes to the Facebook Audience Network, which sells ads on apps and websites outside the social network but using Facebook user data. Now, Facebook will serve ads on outside properties to users who aren’t even members of the social network.

As the dominant force in digital media right now, Facebook can afford to flex its muscles. Most of what Facebook is doing with its advertising is a break from how internet ad serving was done on desktop, which, to be fair, evolved as a messy system, but also one open to new companies.

“We’ve seen the air get sucked out of ad tech. Programmatic is still central for any big marketer, but they want programmatic that’s targeted, people-based, and those are all promises ad tech wasn’t built to deliver. Facebook is leading with people-based advertising, and now it’s building scale,” said David Skinner, vp of strategic alliances at Merkle.

Facebook’s ad tech strategy stands in contrast to what Google has done to build a more open ecosystem. The rivalry between these dominant internet ad giants is shaping up to be today’s version of Microsoft versus Apple of the 1990s. In this case, Facebook is Apple with its closed ecosystem, and Google, ironically, is Microsoft with near monopolistic control over all key aspects.

Instead of the open exchanges that third parties access to bid on ad inventory, Facebook is concentrating on its API — application programming interface — a fortress that it controls. Facebook is the gatekeeper of what marketing partners access its API.

With LiveRail, it is only catering to preferred publishers and approved advertisers with a private marketplace approach, and it is nudging longtime publisher clients like Hulu and A&E Networks to just put their ad inventory up for sale through the Facebook Audience Network.

Facebook is taking this “walled garden” approach because it’s protective of user data, according to Tom Affinito, vp of product marketing at Kenshoo. “A lot of functionality from FBX is available in more robust ways already inside Facebook.”

Facebook declined comment for this story.

Facebook has deep insights into billions of unique internet users and can project lookalike models to figure out the rest for highly targeted advertising and accurate measurements of ads and their impact on users. This could provide the clarity that many marketers have repeatedly asked for from ad tech. But one man’s mess is another’s business model.

“It’s starting to really fuck up some major aspects of revenue streams for constituents on either side, ad networks and publishers,” said one ad tech source.

Not all is lost, because even if Facebook and Google control half the internet ad market, there will always be room for independent players. “Marketers demand choice over where to spend their money. If you’re a brand manager, you don’t spend it all with Google and Facebook and say you’re done,” Skinner said.