Google alert! Facebook is all set to enter the programmatic ad market

SOME 85pc of all new online advertising spend reportedly goes into the coffers of Facebook and Google. But Facebook may have found a way to carve an even bigger slice of the digital ad pie for itself.

The social network is gunning for Google and is targeting a monopoly it has in relation to serving ads on publishers’ websites.

Header bidding (aka advance bidding) is an area where Google is already under pressure. It’s a process that allows publishers to wring more money out of the ad inventory on their websites. It uses a piece of code in the header of a site to get a range of bids on any ad slot before the body of a page loads. This increased real time competition means publishers can make more money from their ads. Business Insider recently reported sources claiming header bidding improves advertising yield by up to 70pc, compared to using Google’s DoubleClick. To date, Google has had a virtual monopoly in this space. Almost all publishers use its DoubleClick for Publishers (DFP for short) to place ads on their sites. However, there are other ad exchanges, and they’re pushing header bidding wrapper technology. AppNexus, Index Exchange and AOL are all proponents.

Unsurprisingly, Google wants to protect its position. It says header bidding will slow down page performance and won’t work with its DFP product. Google is also trying to combat the appeal of header bidding with a tool it calls Exchange Bidding in Dynamic Allocation (or EBDA, because ad tech without acronyms is like Hall without Oates). EBDA will allow publishers using DFP to see how much media buyers are willing to pay for ad impressions, and accept bids from multiple sources.

But it’s all within the Google ecosystem. As a result, there are concerns over transparency and the cost to ad tech companies — many believe that participating ad tech companies will have to pay Google a small fee to participate. Earlier this year, Brian O’Kelly the CEO of AppNexus, wrote on Quora: “My guess is that EBDA will cost publishers 15pc of their programmatic revenue — and will have minimal impact on page load.

“I don’t see any publishers that care about programmatic revenue adopting it. In the next 12 months we will either see Google make DFP truly exchange-agnostic, or header bidding is going to be the default for programmatic until we see an ad server that integrates the benefits of open programmatic without requiring header bidding.”

Enter Facebook. The social network’s header bidding technology is rumoured to launch late in September or early October and will give publishers the ability to sell ads through Facebook’s Audience Network.

For Facebook, header bidding is a double whammy — it may widen a chink in Google’s armour that others have been picking at, and it offers an opportunity to target users on the open web.

Facebook has been trying to figure out how best to get its ads into the wild for some time now. But not all of its attempts have worked out as planned. Its LiveRail video ad exchange was shut down earlier this year, and ambitious plans for the Atlas ad-serving platform, bought from Microsoft for $100m in 2013, appear to have been shelved.

Header bidding, though, seems to have more promise, especially in a mobile web environment where Facebook is laser-focused.

So how should publishers feel about the arrival of Facebook on the header bidding scene? Well, they should be wary about outsourcing any new tasks to Facebook. Many are already over-reliant on the social network as a distribution platform, and should therefore be cautious about allowing it serve ads on their web properties as well.

However, Facebook’s adoption of header bidding does add some legitimacy to the practice, which should benefit publishers. That said, some media companies’ heads were already being turned by header bidding. Last month, Time Inc announced it would partner with Index Exchange to implement header wrapping across the online sites of People, Sports Illustrated and Fortune. The company expects an increase in revenue of 10pc to 20pc for impressions sold through Index Exchange.

Header bidding may put Facebook on a more competitive footing with Google in the open web, but it also offers a glimmer of hope for online media outlets looking for a path to profitability.

Its adoption of header bidding can only drive an increase in transparency and openness in online advertising.