1. Facebook’s Chris Copeland 31/05/2012
Premium
Inventory Problem
Background
Less than two weeks after its IPO, Facebook appears to be headed for a dramatic shift in the way its
most prominent ad inventory is bought. As reported on the Inside Facebook website and Business
Insider, Facebook is readying a move that would enable brands to purchase premium inventory
through the same self-serve marketplace that currently sells marketplace inventory.
Details
Premium inventory in Facebook consists of advertisements on the Home Page, Log Out screen and
in the News Feed stream through the Reach Generator product. While each of these products
provide broader exposure for a brand, they historically come at a higher rate and are only available
on a negotiated cost basis via a Facebook sales representative.
With this anticipated change, it Examples of Premium Ads on Facebook
appears that brands will be
able to buy at least the
Homepage and right rail ads
via the same API system as the
marketplace ads. Reach
Generator and mobile ads will
continue to be sold only by
Facebook representatives.
Facebook has yet to confirm
timing of the move, but has
acknowledged that it is coming
and on-going tests are taking
place with partners such as
Buddy Media (a GroupM
preferred Facebook API technology).
Implications
This shift has two important implications for brands as they explore the purchase of advertising on
Facebook.
 It puts inventory into an auction model that was previously only available under negotiated
rates. This is likely to cause more competition for given placements as more brands feel it is
suddenly attainable. The downside, as described in The Winner’s Curse, a GroupM Next report
on anarchy in the online ad auction environment, is that with more competition comes a likely
cost increase. The positive for brands is that the price of the inventory to date has been set by
Facebook and controlled in such a way that it has likely been overvalued.
 If brands are able to buy via auction for this inventory, one can expect the increase in
competition to be more than offset by the decrease in ad rates as the market, not the
publisher, sets the new normal.
Summary
Considering paid media is an increasingly important component of any social media strategy,
moves in ad inventory on platforms such as Facebook bear watching as they come to market. We
will provide additional perspective on this topic once timing is set and more is understood about
the technology utilization required to take advantage of Facebook’s new mechanism to buy existing
inventory at potentially better rates.