One and a half billion people just wasn't enough. Facebook, which turned its 1.65 billion users into an $18 billion ad business, will now start showing ads to the rest of the world, even if they've never signed up for a Facebook account.
The social network already tracks its own users around the web through its Audience Network, an advertising network for third-party websites; now, it is expanding this capability to non-Facebook users, anyone visiting a website with a "like" button, the company announced Friday.
That step is an effort to reach the more than 3 billion who use the internet, a broadside against Google's $24 billion display ad business, the world's largest. Facebook's strength lies in the troves of data it has on its active user base. That information can be used to inform the habits of the users it doesn't know so much about, what's called "lookalike targeting." Facebook will watch its own users and target non-Facebook users who appear to have the same or similar traits.
“Because we have a core audience of over a billion people [on Facebook] who we do understand, we have a greater opportunity than other companies using the same type of mechanism,” Andrew Bosworth, vice president of Facebook’s ads and business platform, told the Wall Street Journal.
While Facebook has been tracking users' internet browsing habits for years to inform its advertising on the network, it only recently started using that system for third-party advertisers. Facebook launched the Audience Network in 2014. In January, Facebook expanded the reach from mobile apps to the mobile web.
"As big as Facebook is, consumers will always spend a substantial amount of time off Facebook," Ari Paparo, CEO of ad tech startup Beeswax (who formerly worked at Google and DoubleClick), wrote in an email. "The point of Audience Network is to use their enormous user base and data set to monetize that off-Facebook time more effectively than anyone else can."
With the update, Facebook is better equipped to compete with Google's formidable ad technologies which power much of the online ad business: AdSense, AdX and Google Display Network. The two tech giants have become the dominant players in online advertising, while competitors Microsoft, Yahoo, Twitter and AOL each only capture a single-digit percentage of total revenue.
In recent years, Facebook has been quickly capturing a greater share of digital advertising dollars. For 2015, Google pulled in $23.3 billion, or 40.1 percent, of digital ad revenue in the U.S., according to eMarketer, while Facebook captured $7.66 billion, or 13.2 percent. But that's expected to rise to 14.7 percent for Facebook in 2016.
While other networks rely on cookies, or pieces of code placed across the internet, Facebook dominates with the “like” button and a supplemental cookie system. Facebook can also match the data of its 1.65 billion monthly active users to the online profiles of non-Facebook users to build on its audience size and custom matching for marketers. Facebook can also match ads with real users, unlike browser-based targeting where a user is inferred through behavior or data.
Still, the majority of Facebook's revenue comes from mobile advertising within its own network. For 2015, Facebook pulled in $17.93 billion, a 44 percent increase year over year. With the Audience Network, Facebook must share the revenue at a 30-70 split, according to the Journal.
Yet Facebook continues to build itself as a one-stop shop for advertising and a powerful ad tech system that is aimed to prevent ad fraud. “We are focused on value. If a publisher is doing things with a lot of robots, well, it turns out robots don’t buy products," Brian Boland, Facebook’s VP of advertising technology, told International Business Times at the launch of the Audience Network's expansion to mobile.
Like most of its projects, Facebook is constantly testing in ad tech. Just this week, the company announced the shutdown of its ad exchange FBX. Facebook is also closing its video ad exchange LiveRail, which the company bought for an estimated $500 million in 2014.