Why Facebook Relies on Third-Party Agencies to Scale Its Ad Platform

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Facebook has a problem that sounds good in theory, but not so much in practice: Too many customers.

There’s no question that the top advertisers want to be on Facebook and inventory isn’t a problem, either. But at the moment, Facebook lacks the infrastructure to stay on top of demand. That’s created a huge opportunity for about two dozen agencies that act as middlemen for Facebook’s ad business.

The firms, listed here, are presented as an alternative or a supplement to the automated Facebook Ads Manager tool. Since the tool was developed with small advertisers in mind, marketers with multi-million dollar budgets usually go straight to the middlemen. Why? In part it’s because Facebook offers so many variables — there are thousands of ways to slice and dice ads by size and composition, but also by demographic and psychographic.

“The reason people come to Clickable is that we’re giving advertisers and agencies the ability to maximize their buys across a great scale,” says Max Kalehoff, vice president of marketing for Clickable. “Our experience with Facebook is that one thing they’ve expressed is they don’t have all the answers.” A Facebook rep agrees and compares the API partners to the SEO industry that grew up around search. “It’s proof of a shift in how marketers think of social in marketing,” the rep says. “The ecoystem is good for everyone.”

Clickable’s specialty is small- to medium-size businesses. Clients include Heatwave Interactive, a gaming company, and Hachette Book Group. When such companies buy a Facebook campaign, Clickable takes advantage of Facebook’s scale to experiment with different types of ads and targeting to see which work best.

There are other factors. For instance, “ad blindness” can develop after a user has been exposed to a single ad multiple times. Marin Software offers a means to automate ads to avoid ad blindness, says Matt Lawson, the company’s vice president of marketing and alliances.

Another service the firms provide is tracking analytics. Facebook provides some tracking, but advertisers will likely want more. For instance, Facebook used to offer a tool that logs pageviews, purchases and other activities that happened after a consumer was exposed to a Facebook ad, but the company ended that program last September. So, if a marketer wants to get a good idea of a Facebook ad’s ultimate efficacy, they have to go elsewhere.

Facebook first opened its Ads API to outside firms in 2009, when the company got serious about leveraging its huge user base with advertising. The strategy isn’t unusual. Google and Yahoo also support a range of ad agencies that simplify buying across their networks. In fact, Google’s recent $400 million purchase of Admeld was designed to simplify a process Google described as “mind-numbingly complicated and inefficient” on its official blog.

What’s different in Facebook’s case is the company launched its ad program in earnest at the moment it became the hottest property on the web. It’s no wonder then that the now 22 companies with access to Facebook’s API hold a coveted position and must adhere strictly to Facebook’s standards. Those that don’t get taken off the list, at least for a short time. Dave Williams, CEO of Blinq Media, one of the first API partners, says some of the firms eliminated from the list were search ad firms that didn’t adapt to Facebook’s model. “They were looking at click-throughs and ROI,” says Williams. “But on Facebook, it’s all about engagement.”

While that ensures a high level of quality, large marketers are no doubt frustrated by the fact that part of their ad spend goes to two middlemen — the Facebook API companies often deal with ad agencies rather than with the clients directly. Like Google, Facebook might also see the value in solving the ad-buying process for clients. The Facebook rep, however, says that such seeming inefficiencies level out because the API firms are so good at maximizing the ad buys. While she wouldn’t rule out Facebook taking more control of the process at some point in the future, at the moment at least, the arrangement seems to be working. Says the rep: “We’re focusing on the core functionality.”

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The Modern Media Agency Series is supported by IDG. IT pros rely on social media. Technology buyers are very social online. IDG research shows that IT pros who visit a social or business networking site at least one monthly consider themselves active users. More than a quarter of the respondents are sharing IT-related news, product information and tactical tips with peers

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