Facebook will run out of room to show ads on its sites next year, as it warned investors on its Q2 earnings call. To continue growing, it needs to put more juice into Audience Network, which reported a $1 billion revenue run rate last Q4.
So why is Facebook specifically targeting the header rather than buying through exchanges? While Facebook could connect instantly to millions of websites through SSPs and exchanges, the header bidding approach cuts out middlemen and tech fees while ensuring broad access to supply.
“If you are a DSP, you really need SSPs to exist. But if you are an advertiser, you don’t need SSPs to exist. You just need publishers to exist,” said Chris Kane, founder of programmatic consultancy Jounce Media.
Facebook's header bidding approach calls to mind that of Criteo, which pioneered an early version of header bidding and used its "first look" access to publisher inventory to cherry pick impressions for its RTB customers before they appeared on open exchanges. As Criteo learned, signing on publishers via header bidding solves a big technical problem for a buyer looking for specific users or data signals.
And publishers loved Criteo's differentiated demand – mostly ecommerce companies seeking to retarget their shopping cart abandoners. Amazon copied that strategy for its A9 business.
In Facebook's case, its differentiated demand is a little different: mobile app-install marketers and, increasingly, brand advertisers and small businesses. Similarly, many publishers prize Google Ad Exchange demand because it includes AdWords, a network of search advertisers and small businesses that buy only through Google.
Additionally, publishers working with Facebook can probably rest assured that the inventory will be safe and in attractive formats like native and video, according to Chris Reid, founder of publisher-focused tech startup Sortable.
Facebook offers “a massive pool of differentiated demand … thus avoiding all the pitfalls of malvertising and mobile redirects,” Reid noted.
But SSPs had better watch out. Facebook partners have a way of becoming road kill.
“Long-term, publishers will be disintermediated because they don’t have a direct relationship with the client and their audience is a commodity,” said Mike Caprio, programmatic GM at Sizmek. “As far as Facebook is concerned, it’s just eyeballs.”
Zach Rodgers contributed.