Cowen Offers Initial Thoughts on Facebook's (FB) New Atlas Ad Platform

Cowen and Company is out with commentary on Facebook's (Nasdaq: FB) new demand-side, ad-serving platform: Atlas. The firm has Facebook with an Outperform rating and price target of $90.

Analyst John Blackledge noted the following items:

Facebook Launches Atlas

Last week FB announced the release of Atlas, an ad platform originally acquired from Microsoft in Feb ‘13 (for ~$50MM per press reports). Through Atlas, advertisers will have the ability to deliver targeted ads to Facebook’s 1.3+ BN user base beyond the Facebook network via 3rd party affiliates. Atlas is best characterized as a demand side (DSP) ad-serving platform (see chart in Appendix). Atlas also offers measurement and success metric monitoring as well.

Atlas and FAN - Adding Capabilities to the Ad Tech Stack

In our view, Atlas builds on FB’s Audience Network (FAN was launched in April '14) which allows advertisers to deliver ads to a network of third party mobile apps. Atlas will be more expansive and span websites, both mobile and desktop, while also giving advertisers access to FB’s user data. Furthermore, by combining Atlas’s tagging capabilities with Facebook user ID’s, advertisers will be able to track the performance and conversion of ads across multiple devices and theoretically even to offline purchases.

Atlas and FAN - Moderately Incremental to Topline in '15 and Beyond

We have not explicitly modeled out a contribution from Atlas or FAN at this point, which should represent some incremental upside to our estimates in 2015 and beyond (at a time where y/y ad revenue growth is decelerating), though it is still unclear how Atlas revenue will be recognized (gross or net). Atlas should boost FB’s programmatic capabilities, which Magna Global estimates will account for 42% of total ’14 display ad spend (~$8.7BN), growing to 48% in '15. According to FB, Global ad agency Omnicom is already on board.

Local Awareness Ads - Geo-targeting Angle

This past week FB announced a new advertising feature known as “Local Awareness Ads”, a service that will enable local businesses to geo-target and serve ads to customers who live/work in close proximity or were recently near local business outlets. In addition to building a custom audience based on demos (age, gender, etc.), businesses can now choose a radius around it in which it wishes to advertise, utilizing location-based information from Facebook users’ desktops and mobile devices. Local Awareness Ads geo-target FB users vs. the current self-serve ad platform that target’s by city/state or down to the zip code level. As a reminder, in 2Q14, FB reported 1.5MM active advertisers (~5% of total company FB pages) vs. 1MM in 2Q13. Bolstering the local advertising platform could drive further SMB and local retail advertisers.

For an analyst ratings summary and ratings history on Facebook click here. For more ratings news on Facebook click here.

Facebook closed at $77.52 yesterday.

You May Also Be Interested In

• TD Cowen Reiterates Buy Rating on Eli Lilly (LLY)
• Citi Downgrades Arch Coal (ARCH) to Neutral
• Morgan Stanley Upgrades Macquarie Group Ltd. (MQG:AU) (MQBKY) to Overweight