Facebook has gotten reams of good press for its FBX Ad Exchange, a cookie-based ad market which allows advertisers to track users who come from other websites — say Target.com — and target them with ads inside Facebook in hopes of tempting them back to the site they were shopping on.
Agencies and so-called "demand side platforms" that buy ads inside FBX have been enthusiastic about FBX so far. We've previously noted that FBX campaigns are expected to take as much as half of the $2 billion RTB market.
But Bernstein Research analysts Carlos Kirjner and Ram Parameswaran say that currently, that's a vast over-estimate. Facebook saw FBX revenues of just $30 million at most in Q4 2012, the pair say.
For that reason and others, Bernstein downgraded the stock to market perform. Here are the highlights of their note as they relate to FBX:
- The Exchange reached just 1 billion impressions a day by December, a relatively small, in fact nearly insignificant number for Facebook.
- We estimate that in 4Q12 the Exchange generated ad revenues in the rough order of $20-30M (about 50 billion impressions throughout the quarter at about $0.50 CPM).
- Facebook disclosed that its Exchange "supported over 1,300 advertisers each day." Even if we assume that each one of these advertisers was an independent bidder in the Exchange, it still seems to us to be a small number relative to Facebook's scale (of users and inventory), which may lead to under-competed auctions (and hence low CPMs and high advertiser ROI).
Disclosure: The author owns Facebook stock.
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