Peter Kafka

Recent Posts by Peter Kafka

Facebook Bulks Up Its Ad Exchange With Help From AOL

ned brodyFacebook’s advertising exchange, which didn’t exist a year ago and now generates real revenue, is getting bigger. AOL’s will start using the exchange to buy ads for its clients on the social network’s pages.

AOL is the highest profile player to join FBX, and may well have the most buying power. is part of the AOL Networks group, which generates around $600 million a year in sales; it can theoretically funnel a lot of that through Facebook’s pages if its clients want.

“We know that advertisers want to include Facebook inventory in their buys — we’re seeing it on RFPs — so we’re glad to be able to further meet their needs,” AOL Networks CEO Ned Brody (that’s him on the right) said in a blog post announcing the tie-up. Look for Brody to pitch advertisers the exchange tie-up as a reason to use his network instead of Google, which doesn’t have access to the Facebook exchange (and may have to wait a verrrry long time to do so).

Facebook set up the exchange last year to allow outsiders to buy ads on the social network using the same targeting data and tactics they use on most pages on the Web. It’s a different strategy from the one Facebook uses to sell the rest of its ad inventory, which uses data Facebook collects about its own members.

The split in ad strategies puts Facebook in an interesting position. The exchange has grown very quickly, and during the company’s most recent earnings call, officials said it was serving up a billion impressions per day. The ad tech guys love it.

That’s in large part because it uses them for the same kind of display ads that you see all over the Web — in this case, the small rectangles on the right side of the Facebook home page, which generally cater to “direct response” advertisers. There’s a lot of speculation that it will start using the exchange to sell mobile ads, too.

But Facebook’s big push, to both advertisers and Wall Street, is that it can deliver ads that no one else can, using its own proprietary format — like its “sponsored stories” — and own data. The bigger its exchange gets the harder it may become to differentiate Facebook from the rest of the Web.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik