Facebook’s path to mobile ad monetization dominance

This guest post was written by Jonathan Raveh, the Director of Monetization at CallApp, a caller ID app. Read Jonathan’s previous Mobile Dev Memo post, How many networks are needed to optimize mobile ad monetization?

In mid-2014, Facebook made a big move towards exporting its abilities beyond its original space. FAN, or Facebook Audience Network was founded in the hopes of challenging the one of the most fragmented and competitive industries – mobile ad-tech.

With mobile ad networks a dime a dozen, FAN had a rocky start. Technology wise, FAN had everything in place, but performance wasn’t as strong as you might expect. FAN’s entire approach, showing ads to only Facebook users, proved to be less productive than expected in the early stages. In its nascent first few months, eCPMs on FAN were humdrum and the general notion was that Facebook has an average product, competitive but with no real advantage. This is no longer the case.

In the past 4 months, Facebook made some interesting changes and updates to FAN. Since we use FAN in considerable volumes at CallApp, and since we are aware of FAN’s competition (and work with some of them), we witnessed some of these changes first-hand and were able to get some feedback from FAN’s reps themselves. While these moves seemed to be separate events at first, it soon became evident that we are in the midst of a broader strategic operation on the part of Facebook, meant to take over the mobile ad monetization arena. Here’s the evidence:

Rewarded Videos – one of the glaring pieces of the market neglected by Google & Facebook is neglected no more. Launched in June, and now with 4 months of testing, sources in FAN report very good feedback, with $15-$25 eCPM. As of now, fill rates are still low, but that’s to be expected from a product in its early stages. Once more advertisers get on board (and they will), 2018/9 will become a turning point for FAN in the realm of rewarded videos, and one can only guess that all the other leaders in that space – Unity Ads, Vungle, AdColony and AppLovin – will lose significant market share.

Floor prices – in July 2017 FAN introduced floor prices. While Google’s floors tend to set a price from which your eCPM cannot go under, FAN’s floor prices are actually ‘target eCPM’, a level that sets the goal for its performance to reach, regardless of any other elements – CTR, impression, and mainly fill rate. The FAN floor price mechanism is more powerful, as it allows much more control and more accurate optimization, especially when FAN is not the only network in your waterfall. As of this moment, FAN floor prices are the most accurate eCPM tool in the market.

Header Bidding – Facebook brought Header bidding to FAN back in March 2017, but it was rolled out on Mobile Web first. However, there was no doubt that this buzzword product will reach apps as well, and as of August, FAN has begun testing Header Bidding with app publishers as well. While Header bidding may not be a useful solution for all app publishers, it does give FAN a strong edge – the more advertisers you have, the more chance you have with a bid that outbids the competition. This holds the key to FAN positioning itself in the top of publishers’ waterfall.

Algorithm change – In mid-September, FAN made an internal change in the platform, which immediately resulted in a dramatic spike in eCPM. When asked about these changes, this was their response: “We made changes to our delivery systems that enabled more demand to flow into Audience Network, leading to a material increase in revenue for publishers. The growth in revenue is driven by an expansion in the number of ads (demand) available per request, that improves relevancy and overall performance of ads shown to people.

These ‘changes’ were not thoroughly explained, and while the true reason may be anything from changing the Rev share (which is in itself a black box in FAN) to an algorithm change, the effects are immediate – performance improved, fill rates are higher, eCPM’s are higher. If you’ve been using FAN inside a waterfall with any type of mediation, you could have easily noticed the effect that this change had on competing ad networks.

Instant games – This was a long time coming, and it finally happened in October – Facebook instant games can now be monetized with ads. Facebook could have easily included this type of monetization solution inside the Facebook native platform, but it chose to include it as a part of FAN, giving FAN another serious boost in quality, and another reason for Facebook advertisers to dip deeper in FAN traffic.

These actions, all happening within 4 months, are undeniably proof that FAN is turning into a main focal point product in Facebook.

In addition to all this, FAN, as a part of Facebook, is a firm believer in native ads. Banners are still an option, but no one in FAN will recommend them. While banners are still Google’s domain, native ads are growing everywhere, not only in social media. The more the industry continues to go mobile, the more FAN gets ahead of the game. Furthermore, FAN representatives continuously express their dislike of FAN becoming a mediation platform in any way or form. Facebook has no desire to participate in the mediation arena, a decision that has many non-business-related reasons, but does suggest what Facebook’s end game is all about – total domination.

Facebook started its long journey in the ad network world slowly and cautiously. That slow phase has ended, and all signs show that by this time in 2019, FAN will dramatically increase its market share in all verticals and ad formats and is set to try and surpass its largest rival, Google. With the levels of demand, targeting abilities and technology Facebook currently possess, there seems to be no stopping it.

Jonathan Raveh is the Director of Monetization at CallApp, a caller ID app. Jonathan has 10 years’ experience in the mobile industry in various content & advertising positions, with previous position as the Director of Partnerships & Community at Appnext, a mobile ad network. Jonathan operates his own Hebrew language mobile industry blog.