How Facebook's Expulsion Of HasOffers Went Down

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hasoffersFor a mobile ad startup, getting kicked off Facebook's platform is pretty much the worst-case scenario. As reported by AdExchanger last week, this nightmare recently became reality for two companies, HasOffers and Kontagent, who were found to have violated data collection policies and were removed from Facebook's mobile measurement partner (MMP) program.

The rejection of HasOffers in particular has shocked many in the lucrative app install vertical.

HasOffers has an impressive customer base that collectively spends a lot of money on Facebook mobile ads. App marketers like Supercell, Zynga, Spotify, and Square use HasOffers' MobileAppTracking solution to attribute installs and post-install revenue back to publisher platforms. The company integrates with some 350 ad networks and publishers, of which Facebook is the biggest and among the best-performing. HasOffers has been a Facebook partner for two years, has invested millions in platform development, and has driven many more millions in mobile ad spend on behalf of its advertisers.

In light of these factors, how could HasOffers end up shut out of the world's largest mobile publisher and driver of app installs? Here's a rundown of the sequence of events as told by sources in the mobile app space with knowledge of the situation.

In September 2013, Facebook notified HasOffers that it was in violation of some data collection policies and asked it to submit to a third-party audit. These policies, as described to AdExchanger last week, included retaining data too long and failing to contractually require advertisers to disclose data collection practices to end users. As a result it was not allowed to onboard new customers for the purposes of Facebook ad tracking for a period of six months.

However there may have been other data misuse in play as well. In an email to customers obtained by VentureBeat last fall, HasOffers CEO Peter Hamilton described how the company "inappropriately" let its customers access device-level performance and attribution data. That violation – helping app owners obtain user-level, albeit anonymous, data – would be significantly more serious than the official reasons given for its expulsion. Some sources AdExchanger spoke with believe it was this practice that led to HasOffers’ rejection.

Whatever the specific reason, it would appear the data practices of MMPs has been on the radar of the highest level of Facebook management. Two sources say Chief Operating Officer Sheryl Sandberg was directly involved in the audit well before HasOffers was kicked out of the program.

After being put on probation in September, HasOffers proposed methods to comply with Facebook's policies. It's not clear which of these proposals were delivered straight to Facebook and which were conveyed through Facebook's privacy compliance auditor, PricewaterhouseCoopers. But there appears to have been some muddled communication along the way.

As the company said in an email sent to customers last week, "We sought clarification on certain issues and offered solutions to allow our products to work within Facebook’s terms. We believed we were working collaboratively with Facebook to comply with their requests."

Time passed, and according to a source at HasOffers, the company felt comfortable that it was moving forward appropriately. "We didn't feel the urgency that we probably should've felt in hindsight," this person said.

Even two weeks ago, when HasOffers had scheduled its final audit call, management was reasonably sure it would be able to satisfy Facebook's concerns.

But it was during that call that Facebook reps signaled serious concerns.

During the meeting, when HasOffers said it had been waiting on Facebook's feedback to implement fixes to its data collection practices, Facebook expressed surprise the company was not already 100% compliant.

On Tuesday February 11 at about 11am, Facebook told HasOffers it was out of the program. The company asked for another chance but the decision was clearly irreversible. Facebook asked HasOffers not to contact its customers until 4pm and in the interim hour it sent coordinated emails to all of those advertisers directly, notifying them of its decision. It was a highly synchronized process.

It's easy to see why Facebook was meticulous about how it handled the removal of HasOffers and Kontagent. Its mobile ad revenue in the fourth quarter was $1.2 billion, surpassing half of total revenue. Additionally the company is in the midst of testing its second attempt at a mobile ad network that will leverage Facebook data for ad placements on outside apps. Perhaps the biggest threat to these initiatives is a perceived lack of control of user data in the mobile environment, which could bring regulatory attention or a user backlash.

But there's another factor that may have influenced Facebook's decision, involving Apple. On the week of February 3, just before Facebook delivered its judgment against Kontagent and HasOffers, Apple implemented changes to its Identifier for Advertisers that prevented apps from using IDFA to track users when those apps didn't deliver ads directly. Since Facebook relies heavily on the IDFA for mobile attribution and is increasingly dependent on mobile, it is seen as among the most vulnerable in the wake of this change.

According to sources, Apple and Facebook had a meeting last week regarding the IDFA changes, although Facebook says these talks were not a factor in its decision or its timing.

HasOffers now has until April 15 to wind down its Facebook integration and help its customers migrate to other platforms. Eleven companies remain in Facebook's mobile measurement program. Of these 11, three – Apsalar, Kochava, and Ad-X -- were explicitly called out by Facebook as suitable replacement partners.

As for HasOffers’s future, the company says it will move forward with its platform ambitions. It hasn’t yet burned through the $9.4 million raised from Accel Partners less than a year ago.

Meanwhile it is encouraging its advertisers to install the Facebook measurement SDK directly, so that they can see the performance of their Facebook ads. Of course those reports won't be accessible within the HasOffers reporting interface, and it remains to be seen if that shortcoming will be a deal breaker for its customers.

An earlier version incorrectly stated Pandora is a customer of HasOffers. It is a publisher partner. Additionally, Facebook notified HasOffers of its rejection at 11am on Tuesday, February 11, not 3pm as previously reported. 

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