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Facebook Q2 Earnings Bonanza -- Could FAN Be Helping?

Facebook, on Wednesday, blew past Q2 earnings estimates with ad revenue hitting $6.24 billion vs. the $5.8 billion expected by analysts surveyed by StreetAccount. Mobile ad revenue took the majority of that (84%) at $5.42 billion, vs. the $4.84 billion expected. That means mobile ad revenue is up 81% year-over-year. And, further, monthly active users reached 1.71 million during Q2, a bit over the 1.69 billion estimate by StreetAccount.

RTBlog wondered what role the Facebook Audience Network (FAN) played in the earnings bonanza.

To rewind a bit, Facebook made some changes to its ad products in Q2. For example, in May it announced it would shutter its ad exchange, FBX, which enabled outside ad-tech companies to buy ads on Facebook. Then, the company said it would shut down LiveRail, its programmatic video ad exchange business. Facebook essentially integrated aspects of those offerings into its own ad network, FAN.

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FAN allows marketers buy ads across the Internet using Facebook’s data and through direct deals with Facebook. The upside for Facebook is that it gets a cut of the ad revenue from those deals. In Q2, Facebook started selling video ads on behalf of other companies and showing ads to non-Facebook users on third-party websites.

FAN just may be part of the fuel that’s adding to the earnings fire.

RTBlog spoke recently with Chris Akhavan, chief revenue Officer at Glu Mobile, a mobile games company that’s been using FAN for the last couple of years. Glu, the creator of the Kim Kardashian: Hollywood game, works with Facebook in several ways. First, Glu advertises on Facebook-owned properties, its app, and Instagram and it also advertises through FAN to promote its apps through other companies’ apps that FAN has integrated with.

“FAN serves ads in our games to help us generate revenue,” Akhavan said. In fact, Glu was a beta tester of FAN and the Kardashian game was one of the very first apps Facebook used to show ads inside of Glu’s app.

What’s the upside for Glu of working with FAN? “The power of what Facebook is doing with FAN is, when it runs ads in one of our games, it can identify if someone playing the game is also a Facebook user. When Facebook makes that link, it leverages its first-party data to show relevant ads to our players,” he said.

What this means is that people playing Glu titles receive highly relevant ads specifically targeted to them. In turn, Glu is able to increase the performance of its ads. Basically, Facebook, through FAN, “is leveraging its own first-party data to help us better monetize our audience,” Akhavan said.

“What I like about FAN is that it’s taking a high quality approach to advertising. There are a lot of shady ad networks. Facebook is clean and transparent. It doesn’t trick the user; it creates a good user experience. Other ad networks we tested in the past optimize for very short-term goals and they trick our users into clicking on ads,” Akhavan explained.

Glu runs a lot of full-screen ads. Outside of FAN, using other ad networks, if users click anywhere on the screen, they’re taken out of the game entirely to check out an advertiser unless they can find the often tiny "X" to close the ad. By contrast, Akhavan said that Facebook offers a button that’s a clear call to action. “The chances of a user accidentally clicking on a Facebook ad are very low.”

Overall, without getting specific or naming an advertiser, Akhavan said that generally, CPMs are 2x better using FAN vs. other ad networks. And, in some cases, CPMs are better than 2x.

“And, as an advertiser, when we advertise on Facebook, we see very strong conversion rates. Facebook is not deceptive to the user. When someone clicks on our ad, there’s a very strong chance that they’re interested in our game,” Akhavan continued. CPMs on ads in mobile games are very broad. One person can play a game for hours and see 30 impressions, but it’s the first couple of impressions that are worth the most.

While Glu is a fan of FAN, it uses many different ad networks—more than 20—to monetize its traffic. In addition, Glu is plugged into hundreds of additional demand sources.

But there are plenty of advantages to using FAN: “Facebook has a huge data advantage with the information it has its audience. Facebook knows all kinds of things about you. That helps us target people for our games,” Akhavan said.

The difference between Facebook vs. Google and Twitter, which has MoPub, is that “they’re more focused on building exchanges, and Facebook is trying to leverage its data to find the right audiences for advertisers,” Akhavan said. Facebook shuttered FBX and LiveRail because it didn’t need to compete with MoPub; it already has so many advertisers bidding on its platform directly, he added.

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