Facebook Audience Network and What it Might Not Mean for Retail

Oct. 8, 2014, 10:08 a.m.

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So Facebook is getting serious on advertising with its new Audience Network (FAN), which will extend its advertising potential beyond its own mobile app, providing a link between advertisers and applications. There isn’t a lot of information available with regards but FAN will enables applications that gather location data to leverage e.g. a navigation application that highlights nearby events, restaurants, etc. But it does not appear to be doing anything particularly interesting on indoor or location, which I think is good for the indoor location industry.

We have seen companies like Amobee and Millennial Media emerge with mobile advertising, and ABI Research expects to see something similar happen in indoor. This is still a land grab and a very specific one at this stage. Big advertising companies cannot afford to focus on something that today does not have the reach and scale to make it interesting. Alongside this, large retailers and public venues will come to appreciate how indoor opens up a whole new advertising medium, which they will want to control. This creates the need for platforms that can work with the specific needs of these retailers, something a large mobile advertising company is not going to dirty their hands with at the moment.

Secondly, this area is fraught with danger in terms of privacy, etc. This is something the likes of Facebook don’t need right now and the returns are nowhere near where they need to be today to justify the risk. When we look at someone like Kroger, 20% of turnover comes from in-store advertising. So mobile, whether it is an app or proximity based messaging, will want to own this space because it is going to be worth so much to them. Similarly, I have heard about airports that have deployed BLE beacons and are now selling the advertising opportunity to retail units. Again, something they could never manage themselves; enter the indoor location advertising platform.

Today, it is unclear what the best model is for start-ups. Some are taking it on a building by building basis, others are installing the infrastructure in as many buildings as possible, to create the reach and frequency to make it interesting to brands. Others are going through applications, either over-the-top (as in Shopkick) or working with the brands (Walgreens and Aisle411). Ultimately, the companies that are successful will find a way to scale up.

There is of course the threat of Google and Apple here that no doubt will create centralized services to manage all apps, offers, coupons, etc, irrespective of the application. These companies are so big, it becomes very difficult for branded apps not to integrate with these types of services. But that does not mean that they won’t still run their own digital loyalty, reward and coupon offers. To reference Kroger again, its first mobile app featured digital-only offers to its customers, why not app only offers, to ensure that they retain control of the advertising dollar and the customer data?

 

I have no doubt that Facebook will move in the same direction as Google and Apple, especially given the huge number of SMEs that use it to drive business - it’s a perfectly natural extension. But there is definitely a gap in the market today that someone can fill. Talking to companies, it is impressive just how many trials are going on at the moment. We will find that adoption will happen very suddenly, with a host of major brands launching across their chain over the next 18 months worldwide. Advertising is not the primary objective in the short term, but it is definitely a medium term goal. Many in the business have accepted that they will leave the advertising part to the expects, but my bet is that at least one new powerful advertising company will emerge from this space.