Facebook pulls plug on its ad exchange;seeks more control over ad inventory

The long rumored demise of Facebook Exchange, Facebook's ad exchange for buying desktop inventory on its platform will mean that brands and agencies will now need to work directly with Facebook to gain access to ad inventory

e4m by Abhinn Shreshtha
Updated: May 27, 2016 8:23 AM
Facebook pulls plug on its ad exchange;seeks more control over ad inventory

Facebook is on the verge of shutting down the Facebook Exchange (FBX), its ad exchange for buying desktop inventory. A Facebook spokesperson confirmed the news to us while ad tech executives we spoke with also said that the expected closure of FBX has been brewing for a long time.

On Facebook's part, the company attributes the closure of FBX to an increased focus on mobile. This is understandable as, currently, 82 per cent of Facebook's revenues comes from the mobile. In this scenario, the lack of mobile integration as well as new products like Custom Audiences, etc. could have contributed to FBX's demise.


"Mobile is now a necessary component of effective marketing campaigns and Facebook is helping millions of businesses understand their customers' purchase path across devices. Dynamic Ads and Custom Audiences have mobile at their core and are delivering excellent results for businesses, so Facebook Exchange spending has shifted towards those solutions," the Facebook spokesperson said.

The spokesperson also informed that the company has begun moving clients and ad tech partners over to newer products with the goal of being fully migrated by November 1, 2016.

"This has been the works for last 18 months. Facebook has been gradually scaling down Facebook Exchange. About 6 months ago, Facebook brought the total number of external partners who get access to inventory via Exchange to 5-6," said the head of one Bangalore-based ad tech company.

A senior executive at a digital agency that is also a Facebook partner was of the opinion that the move was "long due" and that this was part of Facebook's "gameplan" since the beginning.

Another senior executive at an ad tech company, with a focus on remarketing, probably the one segment that will be most impacted by this decision, admitted that they had to stop utilizing Facebook inventory via FBX over an year ago due to high entry barriers.

So what does the shutting down of FBX mean? Facebook normally sells ad inventory in three ways----the first is directly via the Facebook dashboard, through a network of partners via API integration and via the Facebook Exchange, which is an ad exchange that allows third party partners to buy inventory programmatically.

By discontinuing FBX, advertisers who want to feature their ads on Facebook will now have to directly deal with the company or agencies representing these clients will need to take a separate route, for example, Facebook Custom Audiences or through the Facebook Audience Network.

The difference is that through these programs, Facebook bundles inventory along with its custom targeting, unlike FBX, which was a plain vanilla ad exchange. This allows Facebook stricter control over the inventory sold. In a way, this is worrying as it creates a walled garden, with advertisers now having no choice but to use Facebook's advertising management platform to run campaigns. In an age where marketers want no barriers between different platforms, Facebook seems to be heading in the opposite direction. What the repercussions of this are remain to be seen.

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