Facebook Makes It Official: An External Advertising Network is on the Horizon!

Facebook recently announced changes to its privacy and governance policies.

It was also included in the changes that Facebook aggregates and shares data on user activity with advertisers — and Facebook says it plans to do so not just inside the network but on external websites as well.

Facebook already uses data collected from users about their likes and dislikes to target ads within Facebook, but it wants to extend those ads outside of Facebook. An external advertising network is on the horizon!

Facebook's advertising matrix will be taken outside of the website itself and be placed on various external websites. There is no word yet as to which websites these will be, but Facebook owns a few popular ones, such as the ubiquitous Instagram.

The model would be similar to Google's AdSense, which has been proven successful and effective. With this, Facebook could possibly compete with Google's advertising model.

This could turn out to be one of the biggest factors in the success or failure of Facebook’s revenue-growth strategy. Increasing revenue is an important thing for Facebook as they are now a publicly traded company.

Chris Dixon, founder of the Hunch who just became the newest partner in Silicon Valley venture-capital firm Andreessen Horowitz, has described this as an “embedded option” for Facebook investors, meaning it could stand to significantly enhance the company’s financial prospects if it is handled properly.

An external ad network is inevitable. Google proved this model with Adsense. With an already huge base of advertisers bidding on CPCs, it is impossible for most other ad networks to compete on publisher payouts. But Facebook’s traffic is so great now that an external ad network might increase their revenues by 2x or so.

Facebook’s Chief Privacy Officer said in a comment to Forbes magazine about the new rules:

“Everything you do and say on Facebook can be used to serve you ads. Our policy says that we can advertise services to you off of Facebook based on data we have on Facebook.”