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Why Facebook looks to Atlas to measure mobile ads

Facebook's 3Q14: Strong earnings, disappointing outlook (Part 2 of 16)

(Continued from Part 1)

Facebook claims that cookie-based tracking systems are unreliable

In October 2014, Facebook, Inc. (FB) re-launched Atlas, the ad server that it bought from Microsoft Corporation (MSFT) last year. Facebook claims that Atlas can help advertisers improve online campaign measurement, and achieve better return on investments by providing relevant ads to users.

During its earnings call, Facebook’s management said that current tracking systems in the market are largely cookie-based, and unreliable as a result. Management added that cookie-based systems “…are not accurate and we think they are only 59% accurate in even the most basic demographic targeting, they just go offline to online. They really work well for one person with one device, usually a PC, thus making online purchases.”

Google Inc.’s (GOOG)(GOOGL) DoubleClick is one example of a cookie-based tracking system. And, with Atlas, Facebook’s trying to take business away from Google. Market Realist’s article, Why Amazon and Facebook are trying to cut Google’s ad business, looks at how Amazon.com, Inc. (AMZN) and Facebook are coming up with advertising programs designed to hurt Google.

Why Atlas becomes an important tool for Facebook

Facebook says that since it knows the real identities of people, it can track users on different devices—tablets, smartphones, and PCs. That’s how Atlas succeeds and where cookie-based systems fail.

Facebook also said that American adults spend about 25% of their time on mobile, yet advertisers spend only 11% of marketing budgets there because of the lack of tools available to measure mobile ad performance.

Facebook derives the majority of its revenues from mobile, so Atlas is an important tool for the company. As the chart above shows, Facebook’s revenue share from mobile has consistently increased, from 49% in 3Q13 to 66% in 3Q14.

Continue to Part 3

Browse this series on Market Realist:

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