Facebook’s New Ad Format
Facebook has come out with a new way of advertising videos on their website. Facebook now has the ability to play video ads in a “carousel” ad format. This will allow the user to scroll through multiple videos from the advertiser. Facebook is saying that this “format gives marketers more options for compelling storytelling in News Feed.”
This new format of ads brings up a question about the pricing and how the price of the carousel ads will compare to the normal ads. Facebook has not disclosed the pricing and are just saying that “the foal of this test feature is to be premium advertising format on Facebook, intended to reach a large audience at specific times.” If this is a “premium” format then I would expect the price of this format to be a lot more expensive than the price of the regular Page post video ads. However, it makes sense that Facebook is not disclosing the price because Facebook hold auctions to sell each ad slot. It would not be wise for them to release a price if they’re going to auction it off. This format is complicates the process of the auction because now not only does the price depend on where it is on the page, it’ll also depend on which format they buyer wants.
In class we learn that Facebook uses a Vickrey-Clarke-Groves (VCG) auction. In this auction all the advertisers are asked to announce their values and a matching will be created to maximize valuation. This auction matches slots to advertisers. However, what happens when Facebook ads a carousel format option? This option will definitely cost more than the regular ads. If Facebook decides to give this option outside of the option which means either before or after running the auction then the advertisers will not bid truthfully. For example, Facebook is running the auction like they usually do and match up slots to advertisers and if the advertisers want a carousel format then that slot the advertiser got will turn into a carousel format and the advertiser will pay an extra fee. If Facebook as the advertiser whether they want the carousel format or the regular format, those who pick the carousel format will bid lower than their true value to compensate for the extra they will have to pay in order to get the carousel format. Another problem is that the advertiser will not know how much more the carousel format is so it will be hard for them to estimate the price difference between their true value and the value they will bid. Another way Facebook can be doing this is by designating certain slots to be carousel format and make those slots worth more. This way they can continue doing the same type of auction they have been doing. This does not give the advertisers a choice in which ad format they will get but the bids will be truthful. Seeing as Facebook has not released how they are dealing with this, these are all just my speculations.
Source:
http://variety.com/2015/digital/news/facebook-tv-advertising-total-rating-point-1201603758/
https://www.facebook.com/business/news/Testing-a-New-Way-for-Marketers-to-Tell-Stories-in-News-Feed