Facebook is planning to shut down the mobile web arm of its Audience Network starting on April 11, the company confirmed on Wednesday.
The exact rationale for the move is unclear, but sources said the decision was likely fueled by browser companies’ recent changes to throttle cookies in the mobile web environment, plus the internal resources required to keep on top of potential negative impacts from new data regulations and brand safety issues.
“We make business decisions based on where we see growing demand from our partners, and that’s in other formats across mobile apps,” said a Facebook spokesman. “We’re focusing our resources there moving forward.”
Facebook launched its Audience Network in 2014, offering advertisers a way to extend their Facebook ad campaigns to a network of third-party apps. In 2016 Facebook expanded the network to include mobile websites. Its clients include big app developers including TikTok, Tinder, Activision and Pandora.
The company has not recently disclosed separate financial figures for its Audience Network, but its revenue appears to be in the multibillions of dollars. Based on available estimates and sources, the revenue for the Audience Network for the mobile web likely represents only a very small slice of Facebook’s overall $70.7 billion in revenue for the fiscal year that ended on Dec. 31 2019.
Facebook’s Audience Network paid more than $1.5 billion to publishers and developers in 2018, according to the Audience Network by Facebook website. In 2015’s fourth quarter, when it was just catering to mobile apps, Audience Network had a “$1B revenue run rate in ad spend,” Facebook said, but it hasn’t provided an updated figure since. Anthony DiClemente, a former Nomura analyst, estimated that Audience Network would add $2 billion to Facebook’s revenue in 2016.
The U.K.’s Competition and Markets Authority estimated that from from July 2018 and June 2019, Facebook’s Audience Network had a 5% to 15% share of the U.K. supply side platform market behind Google’s AdMob (with 10% to 20%) and Google’s AdX (25% to 35%).
The revenue split between Audience Network’s web and app arms is unclear, although sources suggested the app segment is responsible for a much larger proportion. The latest move will not affect publishers’ ability to insert Audience Network ads into their Instant Articles.
The open web environment outside Facebook’s properties has changed significantly in the years since its Audience Network launched. The majority of browsers have now turned off third-party web tracking by default. And Google, whose web browser commands the largest market share, indicated last month that it plans to switch off support for third-party cookies within two years. That move would likely hamper Facebook’s Audience Network.
The open real-time bidding environment is also under increasing scrutiny from regulators, particularly in Europe where the U.K.’s data protection authority has repeatedly called on ad tech companies to clean up their act or else face penalties under Europe’s General Data Protection Regulation.
On a call with analysts last month, Facebook CFO Dave Wehner said his company expects to see a targeting “headwind” with the rollout of California’s Consumer Privacy Act and with changes in operating systems and browsers. Facebook has ramped up its own privacy settings, such as last week introducing its Off-Facebook Activity tool, which allows users to disconnect from their Facebook account information that companies have shared about them.
Audience Network’s retrenchment calls to memory similar moves by Facebook to cease earlier efforts to place ads on third-party sites and apps. In 2016, Facebook shut LiveRail, the video ad exchange and ad server it had purchased for a reported $400 million to $500 million just two years earlier, citing ad fraud and viewability issues. That same year it also discontinued FBX, the desktop ad exchange it had built in-house. And later that year, Facebook began winding down the Atlas ad tech platform it had acquired from Microsoft in 2013. In 2019, Facebook shut down the Audience Network‘s connected-TV service.
“Facebook has a lot of owned-and-operated inventory they would undoubtedly prefer to monetize,” said Brian Wieser, GroupM’s global president of business intelligence. “Selling ads on other properties is generally less lucrative because of the revenue-sharing agreements they would have to enter into.”
Instead, Instagram has turned out to be a better “hedge” to the core Facebook product, at least relative to what the company had likely anticipated during the period when it was more focused on Audience Network, Wieser said. Facebook does not disclose Instagram’s financials in its earnings, but earlier this week Bloomberg reported the photo-sharing app generated about $20 billion in ad revenue in 2019, citing people familiar with the matter.
The closure of Audience Network’s mobile web arm was a “fairly solid move,” said a marketer who declined to be named in this article. “The web part is the riskiest — brand safety, ad fraud, viewability concerns — and also a space where Google and others are so dominant,” said the marketer. “Plus it somewhat undermines their core offering by implying that it’s like for like to have a random banner ad versus a Facebook placement.”
Facebook’s app portfolio has long been a leader in social networking and messaging. “By having a [software development kit] in top gaming, dating and music apps, Facebook is able to share its vast performance-advertiser demand with the titles where users spend the bulk of the rest of the time on their mobile device,” said Matt Barash, AdColony’a head of strategy and business development. “No analogous comparison exists in a web-based environment: Time spent is completely bifurcated,” added Barash, whose company is a mobile-focused ad tech firm.