Ad buyers prepare for headaches after Facebook cuts off third-party data

Now advertisers will have to piece together their own third-party data deals from a company like Oracle if they didn’t have any in place already. The wrinkle is that advertisers aren’t really sure how much they were previously paying for that data when Facebook was the one managing those deals.

“Facebook was like, you have to contract those deals yourself now, so we’re all trying to figure out what the pricing structure should be,” said Anne DiNapoli, group media director at independent agency 22squared.

Facebook’s third-party data program was basically a black box for advertisers. When advertisers bought ads using Partner Categories, they didn’t know how much of their money went toward covering the data costs. Facebook would just lop off some percentage of the advertiser’s bid price and send that money to the relevant data provider. That makes it hard for them to know what their costs should be now.

“The official verbiage [from Facebook] is that, when an advertiser is using Partner Categories, there are systems delivering the ads [that are] reducing your bid in the auction by no more than 15 percent to cover your data costs,” said Michael Price, senior director of social media at Dentsu Aegis Network’s iProspect.

Facebook did not respond to a request for comment for this article.

Another frustration is that, while Facebook won’t be handling the data deals, its ad prices have not decreased in proportion, said DiNapoli. Advertisers typically spend more money for the same campaigns they would have run a year ago. Not that that’s a surprise to ad buyers, who have observed Facebook’s average ad price increase year over year for every quarter since at least Q1 2015, per the company’s earnings reports.

There is a silver lining to the present ad-and-data pricing problem. It’ll be easier for advertisers to manage the costs of using that data for their Facebook campaigns once they find out what those costs really are and pay less overall if they can shave costs on either or both sides. “They are able to see how much of their actual marketing dollars are going towards media versus data,” said Jenny Son, gm of social media at Wpromote, an agency that specializes in direct-response advertising.

Advertisers will have more flexibility over how and how much they pay for the third-party data. For example, an advertiser can put 10 percent of its media buy to use Oracle’s “standard” data categories, like demographics, hobbies and interests, or 15 percent to use Oracle’s “premium” data, which it pulls from Nielsen, comScore and financial services companies, said Son. An Oracle spokesperson declined to comment on how the company prices its third-party data.

Other data providers charge a flat fee, like $1 or $1.50 depending on the audience segment, that can be added to the advertisers’ CPM, said Price. And since advertisers are buying the data themselves, they can lobby for lower rates.

Facebook’s management of the third-party data deals and subsequent decision to no longer manage those deals may have frustrated advertisers, but in the end, advertisers may be better off relying less on the platform.

“It’s gotten little bit more complicated on a forecast level, but the transparency is definitely good because [advertisers] know exactly what data they’re buying and using. So overall, this is a good thing,” said Son.