How Facebook's Impending Deal For Microsoft's Atlas Fits In With Its Plan For World Domination

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In early December, we said that Facebook was looking to purchase Microsoft’s Atlas Solutions — a deal that could turn the social network into a true rival to Google. And it looks like the buy is going to happen sooner rather than later.Sources told Ad Age that Facebook could buy Atlas within a week. Although its offer is still unknown, past companies have put in offers for between $30 and $50 million. (Microsoft got Atlas when it bought aQuantive for a whopping $6 billion in 2007, which it admitted was a total waste in July.)

Why this is huge for Facebook

Although Microsoft has been trying to unload Atlas for a while, and will do so at a much lower price than the purchase sticker, this buy would be huge for Facebook. Not only would it allow more advertisers to connect with its users (the social network has a billion email addresses, and phone numbers in its user profiles) to better measure campaign effectiveness, but it could also help Facebook build an external ad network.

Facebook already has a presence outside of its website. The “Like” button exists all over the internet, which allows people to interact with the social network — and allows Facebook to collect data — when they’re not on their actual Facebook account page.

And a policy change in May alerted potential investors to the fact that Facebook users might eventually see specific ads based on information gathered on the social media site elsewhere online.

“We can foresee a future where we might serve ads off of Facebook, and they may be standard ads or they might be, ‘your friend John liked’ a product,” director of corporate communications and public policy Barry Schnitt told CNET.

Facebook also tested a mobile ad network in September — that it subsequently stopped testing in December — that showed ads to Facebook users on different mobile sites and apps as long as they were logged into the social network. (Although a Facebook rep noted that the ads wouldn’t have the “social context”  — meaning that you wouldn’t be told your friend Bob likes Domino’s when you’re on ESPN’s mobile site.)

Even though the trial was put on hold, this shows Facebook’s clear dedication to giving Google a run for its money in the general web ad business outside of Facebook.

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Photo: BI

Becoming a real Google rival?This buy could make Facebook a true Google rival. Microsoft, after all, is the second ad server in the market behind Google’s DoubleClick.

Lucy Jacobs, COO of Spruce Media (major Facebook media buyer) told Business Insider via email that this move is reminiscent of how Google became a powerhouse.

“Atlas would immediately give FB access to lots of inventory all over the broader web (off-FB display inventory),” she wrote. “It’s the same playbook that Google took when it acquired DoubleClick – use the ad server to turn into a multi-billion dollar ad network and ad exchange powerhouse. These ad servers are ‘the plumbing’ on the internet that deliver and track all the display ads all over the web, so it would immediately ‘plug FB into’ lots of publishers. Seems like a smart move for the F-book. Likely makes the $1B off-FB ad network revenue run rate more of a reality near term (i.e. – within 12 months).”

If Facebook wanted to have a competitive ad network, which we believe it does, its two options were to build or buy.

Scott Fasser, director of digital marketing solutions at B2B digital marketer Optify, told Clickz that buying Atlas, which gets billion of impressions a second, is the best bet.

“It’s a super-smart and big system that puts them squarely in competition with Google. Atlas is not something you can just build from the ground up; the system has developed over a decade,” Fasser said. “It’s not just Facebook using Atlas, everybody is using Atlas.”

Facebook has already taken on Google’s search business with Graph Search, taking on its ad business is the next logical step.

Why is Microsoft willing to sell?

Even though Atlas is a valuable asset to Facebook, Microsoft is ready to unload the product.

Slowly but surely, we have noticed Microsoft unloading its ad business. And one of the first signs of defeat was when it admitted that its $6.2 billion investment in aQuantive was a total waste — and one of the main reasons it bought aQuantive was for Atlas.

Microsoft also made many of its advertisers its antagonists when it made Internet Explorer 10’s “do not track” feature a default setting without consulting its advertising department.

It also lost (or laid off) a slew of ad execs, announced plans to reduce its advertising TV network, and cut its salesforce by 15 to 30 per cent.

So the sale of Atlas isn’t that surprising.

What’s next for Facebook

If and when Facebook buys Atlas, which is a publisher and not an ad server, the next obvious step would be for Facebook to buy (or build) a grown-up, non-Facebook data management platform (DMP), giving it the same capabilities as a fully fledged ad network.

Jacobs, of Spruce Media, told BI that there are some risks involved with Facebook creating its own network.

First off, “an ad network may serve to only spread pre-existing budgets thinner (in other words, the ad network may not prove to bring incremental money),” Jacobs said.

The second risk: “An ad network targeting users on the basis of criteria “known” only to Facebook might be construed as breaching consumer privacy (regardless of any policies consumers have agreed to).”

Still, the rewards may outweigh the risk. Jacobs guessed that, “With an already huge base of advertisers Facebook’s traffic is so great than an external ad network could easily increase revenues by 3x.”

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