Microsoft Already Lost Facebook's Ad Business

While Facebook’s communications department may not be confirming the removal of Microsoft’s ads altogether, a number of people on Facebook’s ad team seem pretty convinced that they’ll be gone shortly. A Business Week article from today quoted a Microsoft employee who said that they might be “adjusting or changing” (losing) their ad inventory, however it’s pretty clear that the decision has already been made as far as we’re concerned.

People that we’ve been speaking to for weeks have been stating that Facebook’s own ad team have been telling them that banner ads will be phased out completely. Then an official Facebook presentation which we posted earlier this week stated that banner ads would be phased out by the end of Q1. We’ve posted a copy of the slide below.

In theory, Mark Cowan of Facebook, who was making the presentation, could have been speaking about international banners. At the time the presentation was made though, international banners had already been phased out. At this point it appears as though the Business Week article is actually an attempt to downplay the fact that the massive social ad inventory, previously provided by Facebook, will no longer be available to Microsoft because their ads weren’t performing.

Business Week accurately describes it as a “Black Eye”. The historical context of this is significant. Google had previously knee-capped MySpace on an earnings call by stating that their social media inventory wasn’t performing well. The reality is that the two largest tech giants have failed at effectively monetizing social media and Facebook’s model is actually evolving well.

While Facebook’s CPMs may still be low in comparison to other inventory, Facebook is no longer bottom of the barrel advertising. It marks a major turning point for the company which is on the path to a public offering. While there is still a long way to go, Facebook is coming of age and the elimination of banner ads is another milestone in Facebook’s ad offering.

So why isn’t Facebook’s communications department flat out confirming the removal altogether yet? In addition to not typically commenting on future plans, throwing Microsoft under the bus probably isn’t the best idea considering that they are a relatively substantial shareholder and still an ongoing partner in search.