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When Facebook CEO Mark Zuckerberg took Wall Street analysts' questions about his Q1 2013 earnings last week, there was one theme he kept returning to: Facebook's new Big Data capabilities.
Most people think Facebook is a straightforward advertising play: It has a massive audience of 1 billion users, and advertisers can buy ads targeting slices of that audience. What could be simpler?
But in the earnings release, three of the six highlights of the quarter were about "Big Data," the trendy notion that the future of marketing lies in super-deep, super-complex data analytics rather than the raw power to deliver lots of eyeballs.
Measurement, measurement, measurement
Here are Facebook's Big Data moves in Q1:
- Launched new advertising products such as Lookalike Audiences, Managed Custom Audiences, and Partner Categories, which help marketers improve their targeting capabilities on Facebook.
- Partnered with Datalogix, Epsilon, Acxiom, and BlueKai to enable marketers to incorporate off Facebook purchasing data in order to deliver more relevant ads to users.
- Enhanced ability to measure advertiser ROI on digital media across the internet through our acquisition of the Atlas Advertising Suite.
The first two points underplay what Facebook is up to. Most people have no idea what Datalogix, Epsilon, Acxiom and Bluekai actually do. Insiders, however, know that Facebook alliances with these companies give it one of the most powerful consumer databases on the planet.
- Epsilon has data on 300 million company loyalty card members worldwide, and a databank on 250 million consumers in the U.S.
- Acxiom has "a comprehensive national database covering more than 126 million households and 190 million individuals."
- Datalogix says, "Our database contains more than $1 trillion in offline purchase-based data and we’re able to covert this data, and any CRM data, into an online universe."
- Bluekai is a data management platform — marketers bring their own data to those companies, and Bluekai will crunch it and turn it into a strategy for making marketing more effective.
The data stored in these companies tends to be anonymized or "hashed." They are not able to identify Jane Smith, shoe-shopper from Montclair, N.J., as an individual. But they are able to identify thousands of Janes who shop for shoes in any zip code you want, in aggregate.
All this is now paired with Facebook's own data — profiles of 1 billion-plus users who are all happily documenting the minutiae of their lives, and their shopping, on Facebook.
Second only to Google
It's dramatic stuff, in terms of its scale. But Zuckerberg hinted that Facebook is still in the baby steps phase of its big data plan, because the last part of the plan — Atlas — isn't even fully plugged in yet.
Atlas is a gigantic internet ad server, previously owned by Microsoft. It's like the plumbing of the web: It serves up ads all over the web and takes a cut from any advertiser using its services. Atlas carries between 10% and 15% of all ads for buyers on the web, according to LeadLedger. It is second in size only to Google's DoubleClick ad server.
Most people have yet to digest that fact: Facebook is now the second biggest web ad server to Google. The deal closed recently, and Facebook has yet to report the revenue impact, if any, of Atlas in its own numbers.
Atlas has yet to shrug
A lot of people assumed that Facebook bought Atlas because it wanted to create an off-Facebook ad network, maybe one in which Facebook data could be used to enhance targeting through Atlas. But that's not the primary goal for Atlas. Facebook has been quite clear about why it acquired Atlas from Microsoft: It wants the data Atlas can provide.
Zuckerberg said on his Q1 call that "Atlas is a really important part of continuing to develop our measurement capabilities": He wants Facebook to be able to tell advertisers how their ads perform even when consumers are offline, and haven't been anywhere near Facebook prior to going shopping:
We believe the Atlas platform will help us demonstrate even more clearly the connection between ad impressions and purchases. We could help marketers measure the effectiveness of their ad impressions better not just on Facebook, but across the entire internet. This means we can take the advancements we have made in measurements on Facebook, including our integrations with Nielsen and Datalogix, and expand them to a much larger audience and to many more purchases.
… Our focus with Atlas is on impression based ads. And the idea is that, you know historically a lot of ads online which were more based on search, the attribution was always that last click. And as people have looked more holistically at all the ad spending they are doing, what they find is that it's not just the last click that matters but it's all the impressions leading up to that click. Importantly, we also drive sales offline. And offline people aren’t clicking through the purchase at all but they are actually walking into a store. So in some sense there is no last click.
And so our focus with Atlas is to take that technology and enable us to improve our ability to connect ad impressions to purchase behavior both offline and online, and not just on clicks but across different ad purchases people do. So that’s exactly why we made that purchase.
Most ordinary Facebook users don't realize how ambitious these plans are. If you bought something with a credit or debit card in the last couple of years, you're probably in Facebook's data pool right now.
Disclosure: The author owns Facebook stock.
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