Facebook Files Patent That Could Have A Massive Effect On Ad-Tech Industry

Facebook has filed a patent to create a new ad exchange that could shake up the ad-tech industry in a big way if it comes to fruition. The patent application suggests that the social media giant is considering building a mega ad exchange that would harness its social data to serve ads and content on websites beyond its own platform.

The patent application describes an ad exchange that combines an advertiser’s data with Facebook’s own social graph to find users that match a given profile. The exchange would provide the advertiser or content maker with the ability to place their content within the exchange. The content could be a standard ad, or a native ad, such as a video, a Facebook wall post, news article, photo or other content types. Therefore, buyers who are trying to serve regular ads could find themselves bidding against a company that is trying to serve a video and a company that is trying to offer an app download, for example. The ad exchange would then serve that content to users who match the profile when they visit a participating publisher’s website. The patent says that if one or more advertisers wants to target the same type of user, a real-time bidding war would ensue, with the highest bidder getting their content served to their desired audience.

Facebook is known for filing many patents that don’t actually come to fruition, so it’s too early at this point to be certain where this is going. However, if the ad exchange does become a reality, it could have a massive effect on both the ad-tech industry and the overall digital publishing landscape. Certainly, the social media giant has an incredible wealth of data that is unmatched by anyone else. The reality is that Facebook knows a massive amount about its users based on information that is put into the platform, such as who they are, where they’ve been, and what they like, as opposed to estimating these details based on browsing behavior. Based on the patent’s concept of serving both ads and content, Facebook has the power to run as a hybrid advertising/native advertising exchange. It could service the varied needs of both the advertisers who are buying the ads and content and the publishers who are seeking monetization of their apps and sites.

What effect could this have on the ad-tech industry?

This new ad exchange could damage Google by drawing publishers away from its AdSense and DoubleClick products. Because Facebook has such a high level of verified data, it has the potential to shake up many companies that place paid-for content recommendations from publishers and brands on websites. Content recommendation platforms who rely on past browsing behavior for targeting, such as Taboola, Outbrain, ContentClick and nRelate, could all struggle to compete if Facebook provides a new ad exchange based on its massive amount of verified data.

Currently, Facebook already has two ad exchanges. However, FBX only allows advertisers to buy ads that appear on Facebook, and although LiveRail goes off the platform, it is limited to placing ads on videos and within mobile apps. Although it’s unclear whether or not the new product would be connected to Facebook’s existing ad exchanges, the patent is big news because it describes a social-driven ad exchange that could operate across any platform or format, serving both ads and content, which would provide a whole new level of power.

Business Insider spoke to Eric Franchi, cofounder of ad-tech company Undertone, who feels that the move makes sense. “It’s mobile friendly; it would give Facebook something new to offer publishers, who they have been courting more lately – perhaps higher CPMs [cost-per-thousand impressions] than other companies or an audience development product; because of their data, one can assume that they could provide more relevant ads than the current companies in the space – sometimes the content recommendations you see are pretty poor quality or not relevant,” said Franchi.

It’s certainly true that Facebook’s new ad exchange network could have a massive effect on the ad-tech industry if it comes to fruition. We’ll be watching closely for developments in the future.