Facebook is planning to shut down the mobile web arm of the Facebook Audience Network in the coming weeks, according to sources familiar with the plans.
The exact rationale for move is unclear, although sources said it seems likely the decision was fueled by a mixture significant recent changes from browsers to throttle cookies in the mobile web environment, plus the internal resources required to keep on top of the potential negative impact of new data regulations and brand safety issues.
“We make business decisions based on where we see growing demand from our partners, and that’s in other formats across mobile apps,” said a Facebook spokesman. “We’re focusing our resources there moving forward.”
Facebook launched its Audience Network in 2014, offering advertisers a way to extend their Facebook ad campaigns to a network of third-party apps. In 2016 Facebook expanded the network to include mobile websites. Its clients include big app developers including TikTok, Tinder, Activision and Pandora.
The company has not recently disclosed separate financial figures for its Audience Network, but its revenue appears to be in the multibillions of dollars. Based on available estimates and sources, the revenue for the Audience Network for the mobile web is likely to represent only a very small slice of Facebook’s overall $70.7 billion in revenue for the fiscal year that ended on Dec. 31 2019.
Facebook Audience Network paid over $1.5 billion to publishers and developers in 2018, according to the Audience Network by Facebook website. Facebook said Audience Network had reached a $1 billion revenue run rate in the fourth quarter of 2015, when it was just catering for mobile apps, but hasn’t provided an updated figure since. Anthony DiClemente, formerly an analyst at Nomura, estimated Facebook Audience Network would add $2 billion to Facebook’s revenue in 2016.
The U.K.’s Competition and Markets Authority estimated Facebook Audience Network had anywhere between a 5% and 15% share of the supply side platform market between July 2018 and June 2019, behind Google’s AdMob [10%-20%] and Google’s AdX [25%-35%]. Of all those estimates, the split in revenue between Facebook Audience Network’s web and app arms is unclear, although sources suggested the app element was a much larger proportion. The latest move also will not affect publishers from being able to insert Facebook Audience Network ads into their Instant Articles.
The open web environment outside Facebook’s own properties has changed significantly in the years since Facebook Audience Network launched. The majority of web browsers have now turned off third-party web tracking by default and Google, the world’s largest browser by market share, indicated last month that it plans to switch off support for third-party cookies within two years — a move that would likely hamper Facebook Audience Network.
The open real-time-bidding environment is also under increasing scrutiny from regulators, particularly in Europe where the U.K.’s data protection authority has repeatedly called on ad tech companies to clean up their act or else face penalties under the region’s General Data Protection Regulation.
Facebook CFO Dave Wehner said on a call with analysts last month the company expects to see a targeting “headwind” with the rollout of California’s Consumer Privacy Act and with changes from operating systems and browsers, according to a transcript of that call. Facebook itself has also ramped up its own privacy settings, such as introducing its Off-Facebook Activity tool last week, allowing users to disconnect information shared about them by companies from their Facebook account.
The Facebook Audience Network retrenchment calls to memory similar moves by the company to shut down earlier efforts to place ads on third-party sites and apps. In 2016, Facebook shut down LiveRail, the video ad exchange and ad server it bought for a reported $400 million to $500 million just two years earlier, citing ad fraud and viewability issues. That same year it also discontinued FBX, the desktop ad exchange it had built in-house. And later that year, Facebook began winding down the Atlas ad tech platform it had acquired from Microsoft in 2013. In 2019, Facebook shut down the Audience Network‘s connected-TV service.
“Facebook has a lot of owned-and-operated inventory they would undoubtedly prefer to monetize,” said Brian Wieser, global president of business intelligence at GroupM. “Selling ads on other properties is generally less lucrative because of the revenue sharing agreements they would have to enter into.”
Instead, Instagram has turned out to be a better “hedge” to the core Facebook product, at least relative to what the company likely anticipated during the period when it was more focused on Audience Network, Wieser said. Facebook also doesn’t split out Instagram’s financials in its earnings, but Bloomberg reported earlier this week the photo-sharing app generated around $20 billion in ad revenue in 2019, citing people familiar with the matter.
A marketer who declined to be named in this article said the closure of Facebook Audience Network’s mobile web unit was a “fairly solid move.”
“The web part is the riskiest — brand safety, ad fraud, viewability concerns — and also a space where Google and others are so dominant,” said the marketer. “Plus it somewhat undermines their core offering by implying that it’s like-for-like to have a random banner ad versus a Facebook placement.”
Facebook’s own app portfolio has long been a leader in social networking and messaging. “By having a [software development kit] in top gaming, dating and music apps, Facebook is able to share its vast performance advertiser demand with the titles where users spend the bulk of the rest of the time on their mobile device,” said Matt Barash, head of strategy and business development at mobile-focused ad tech firm AdColony. “No analogous comparison exists in a web-based environment: time spent is completely bifurcated.”
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