It was announced earlier this week that Microsoft has won an advertising deal with Facebook, and terms weren’t disclosed. Shoemoney seems to have a source saying the deal came in around $850 million, others hear it’s more like $200 million, but without knowing exact terms beyond it involving display advertising and sponsored listings it’s hard to really analyze the details too much.
Techcrunch thinks the most interesting part is that the deal wasn’t with Google. I disagree, I think the most interesting part is that Microsoft is working on becoming an ad exchange.
According to the New York Times:
Steve Berkowitz, senior vice president of the online services group for Microsoft, said ads would be made for Facebook, but they could also be aimed at any of MSN’s various Internet properties, which have a total of 400 million users worldwide. At the same time, ads running on MSN properties may also appear on Facebook, depending on what audience the advertiser wants to reach.
Also according to the Times:
Phil Leigh, president of Inside Digital Media, a market research firm specializing in digital media, said of the deal. “But Facebook is also a legitimate test bed, a place where Microsoft can test new technology in a commercial context,’’ he said.“What we’ll see is Microsoft attempt to do some fairly leading-edge type of things, involving banner ads, animation and interactivity,’’ he added. “Whatever technology they develop and use effectively in Facebook, they’ll be able to use it elsewhere.’’
Couple those with Steve Ballmer’s quote back in May from Red Herring:
“…think of us as becoming the eBay of advertising where we will bring together buyers and sellers in an online marketplace.”
Looks to me like Microsoft just made the first big play towards their exchange marketplace, and Google’s really had their own “private” exchange for a while with Adwords/Adsense.
Already I see some difference in Microsoft’s ideas from other exchange marketplaces out there, and that they are exclusively representing Facebook’s advertising inventory. Is that really the best thing for Facebook long term? Sure, it helps with their guaranteed cash flow if Microsoft will throw hundreds of millions at their inventory up front, but doesn’t that mean in an open advertising marketplace they could make even more money if anyone could buy from them directly?
Microsoft is going to be taking a sizeable cut of any ad showing up on Facebook. Is that really the most efficient and profitable thing for Facebook? How much incentive does it provide for Microsoft to work their asses off when they’ve got the inventory locked up? What if Microsoft had to continually compete with others to win access to Facebook’s inventory?
Based on these things, I’d say Microsoft is the winner in this deal providing that Facebook’s inventory is worth what they’re estimating.
As Microsoft, Google, and others continue to move into the advertising marketplace/exchange space over the next couple of years, I hope people realize that buying exclusive access to inventory does not constitute providing a true advertising exchange.
