OPA Intelligence Reports

Posted in News on 02/25/2013 By Mark Glaser & Courtney Lowery Cowgill

Facebook Exchange: boon or bane?

Facebook’s ad exchange has been getting its share of good press but Wall Street isn’t impressed. When it launched, industry pundits were enthusiastic to say the least. Business Insider even estimated that Facebook Exchange would take as much as half of the $2 billion real-time-bidding market. Out of the gates, it showed promise, with advertisers (like Target) saying the exchange was working well for them. But even with decent Q4 numbers – the exchange reached 1 billion impressions a day – Facebook’s stock still was downgraded. “Facebook’s mobile inventory and Exchange still present significant untapped monetization opportunities, but much of this upside is now in consensus [estimates] and the pace at which these have evolved over the last two quarters justifies some caution,” wrote Bernstein Research analyst Carlos Kirjner when the firm downgraded the stock, dropping the target price to $27 from $33.

But then Adobe seemed to come to Facebook’s rescue, reporting that aggregate data from campaigns using Adobe Media Optimizer showed a 70 percent higher conversion rate after 30 days on the exchange. All this happiness could be because of cheaper prices, but Justin Merickel, senior director of new product innovation at Adobe Advertising Solutions says that’s not going to last. He tells ClickZ’s Susan Kuchinskas, “For bidded markets, as competition rises, you’ll see a commensurate rise in pricing. We hypothesize that, since performance is strong, demand will grow over time and prices will rise. We’re still in the ramp-up phase.” Facebook will soon have some competition in this realm, however. Twitter recently announced it is releasing an API for advertisers to automate ad buys on the network. As Tim Peterson writes for Adweek, this means LinkedIn, Twitter and Facebook are all now offering APIs. And that means, “As more social marketing software firms roll up all three tools into their platforms, marketers should find it easier to allocate budget dollars to each and compare how they perform.”