Q&A talks with Paul Pita, CEO of Pita Group in Rocky Hill, about Facebook Exchange and third-party ad brokers who use cookies to track users on the Web.
Q: Facebook has signed deals with several demand-side platforms to enable real-time bidding on its ad inventory, called Facebook Exchange. What is it and what does it mean in terms of marketing?
A: Facebook is working with third-party ad brokers that use cookies to track users on the Web. Both Google and Yahoo work this way. It’s a demonstration of the evolution of what’s happening with online advertising. Facebook Exchange is another step into what’s been going on already. Facebook has such an understanding of their audience behavior. Facebook members may find that a little intrusive but the reality is cookies have been dropped on people’s computers to track behavior for many years now. The advertisers are bidding on the terms you are interested in. This is Facebook stepping into the arena Yahoo and Google have been doing. Now they’re selling it based on bidding for the highest price.
Q: One expert says it came about because GM cancelled advertising on the social networking site and that this could be the monetization model that Facebook needs. What are your thoughts on that?
A: I haven’t read that anywhere. I don’t think that’s why. I believe Facebook did this because they are now a new IPO and this is in timing with what they must demonstrate to their shareholders. That they have a profitable financial model.
Q: Real-time bidding, or RTB as it is sometimes called, has been considered risky because marketers did not necessarily know where their ads were going to appear. Does this change that? Is Facebook considered a safe environment? Why or why not?
A: Facebook as a publicly traded company is being monitored constantly, which makes it safe. In the early days, online ads were not being monitored as much. With the sophistication of Web tracking systems, we can monitor beyond the click-through rates down to who is clicking.
Q: Facebook seems to be late to the real-time bidding exchange of advertising. Google has seen spending on AdX, its exchange, jump 850 percent in 18 months, according to Forbes. Why did Facebook wait this long? Does the delay hurt it?
A: Facebook was trying to demonstrate stability of the company and manage the growth of the site infrastructure before they were in a position where they could roll this out and manage it correctly. I’ve seen much more advancement of their infrastructure over the last 12-24 months. This was a matter of them setting themselves up with regards to the timing of the IPO. They’ve been planning the IPO launch for a while so it was attractive to investors. This has been part of that strategic plan to spike up their shares. I don’t think the delay hurt it. Google is getting into Facebook space with Google Plus. You could have the same question for Google. Why is the largest search engine getting into social media so late? They’re entering in from different points. It’s going to be a transition year for marketers to look at real time bidding with Facebook. They’re both stepping into each other’s spaces, which is interesting. They have this wealth of knowledge, which is gold to marketers. As marketers, we try to manage advertising waste as much as possible. The closer we can get to the right person, the better results we can demonstrate. This is about minimizing waste to be more efficient with shrinking marketing budgets.
Q: Is Facebook where all the marketing money is heading in social media? Is it going to be bigger than Google?
A: I don’t think Facebook will become the 800-lb gorilla. What we’re seeing now with social media and search engines like Google, some of them may be more focused on various consumer behavior. I think we’ll see tremendous profitability but they won’t be the dominator. Think about Twitter, LinkedIn, Google Plus, etc. Look at their various platforms. They’re finding their audience base. It’s going to provide different value to different marketers. We’re still so early in the game of how advertisers and marketers are looking at these online channels and platforms.
Q: In your view, what’s the next big thing coming up in marketing on social media? Is there something on the horizon that is going to challenge Facebook for marketing dollars?
A: Facebook and Google both stepping into the other’s territories is demonstrating that they are building these platforms to understand consumer behavior and their interests, where they are going, what they are looking at. As they capture these data, it gives marketing agencies the ability to manage the waste and target interests. In the past, and we still do, we market at a point of sale. Now what we’re going to see more of as the industry learns more about your points of interest, the brands and the advertisers are going to be able to market directly to you even when you are not thinking about it. You could be shopping for sneakers online one day and now you get targeted advertising for sneakers. Google is still looked at as one of the top advertising platforms for RTB. Facebook is going to move quickly. There is a lot of consumer advertising that wants to get access to Facebook and we’ll see major profitability for them because of RTB. It will be better for advertisers and Facebook because it’s going to give legitimacy to the business model of Facebook. They’ve got this data mine and this is where the game changes.
