Commentary

FBX Prices Were Going Up Even Before Google Joined The Party...

Arriving fashionability late — or, rather, not being invited until the party had been going on for awhile — Google will soon be able to offer its clients easy access to inventory available for real-time bidding (RTB) on the Facebook Exchange (FBX).

When Google announced the partnership, my first thought was that it would cause prices on FBX to shoot upward.

While a recent report from Turn shows that the prices on FBX are already on the up and up (eCPM is up 87% year to date), it's still relatively cheap. The eCPM of all Facebook ads was $0.45 in Q3, and the eCPM of over 20% of the impressions was just $0.10.

A source close to the Google/Facebook partnership told me that the partnership was really about benefitting mutual clients. The "this is just business as usual" response isn't the juiciest — because wouldn't this whole thing be much more fun if this was some grand plan by Google to somehow gain previously unobtainable insight into the world of Facebook advertising? — but it makes sense.

For Facebook, the partnership figures to boost competition and, in turn, prices. For Google, it makes DoubleClick more valuable. It's a win-win.

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Previously, advertising agencies that use DoubleClick would have to use another source to reach FBX inventory for their clients. While annoying, plenty would do it.

At the same time, I'm sure there were several agencies that didn't offer access to FBX; DoubleClick was already connected to over a dozen exchanges, so it's not like its clients were hurting for inventory options.

In either case, a new source of inventory will be made easily available for a substantial amount of advertisers, which means more advertisers are going to be vying for already hot Facebook inventory. 

1 comment about "FBX Prices Were Going Up Even Before Google Joined The Party...".
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  1. Chris Zaharias from Campanja, October 25, 2013 at 1:47 p.m.

    [Disclosure: I work at Triggit, a DSP heavily focused on FBX]

    Clarification: Google hasn't yet joined the party, as it appears they won't be live on FBX until Q1.

    FBX makes 25% of the world's display inventory available to RTB, and the only thing keeping FB from getting to the 4-5X (my rough knucklehead estimate) higher CPMs other exchanges have gotten to is time & advertisers. Google will bring 50-100X (yes, you read that right) more advertisers to FBX, and that'll be great for FB. For Google, it'll let them check-box advertisers' desire to attack this new channel *and* increase their margins.

    One important thing to note: RTB auctions are very different from SEM auctions in one key respect: each impression is an auction (as opposed to groupings of queries into one keyword), so you need 1-2 more orders of magnitude of advertisers to get to a level of competition across inventory that meaningfully drives up prices. IMHO, *that's* what Google will do for FB, and the only question is how aggressive Google will be in pushing spend to FBX. I'd guess they won't be, which will be great for other FBX players who will take those 50-100X more advertisers who've dipped their toes in FBX and give them the full exposure they want & need.

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