Facebook No Longer Allows Ad Arbitrage

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changed around their policies to prevent media buyers from committing arbitrage.  What some media buyers are doing is buying ad inventory for cheap and then selling it to clients for a markup.  Often times, agencies accuse each other of messing with a client’s money.  Big brands like Ford, Citibank, Unilever, and Kimberly-Clark had to pull their advertising budgets from online ad agency trading desks because the agencies could not explain how the money was being spent, according to BusinessInsider.

Facebook changed around the policy two weeks ago.  The new policy is written in Facebook’s “platform policies” for marketing vendors that use Facebook’s Ads API to buy ads in the social network.

The new policy states: “You must not sell ads on a fixed CPM or CPC basis when using the Facebook advertising auction without our prior permission.”

This means that companies must not charge flat fees for ad prices on Facebook since Facebook’s ad inventory is sold on an auction basis.  The prices change based on supply and demand.  Companies will need to charge a flat or fixed CPM or CPC based on what the prices are.

“To increase transparency and client success in the ecosystem, we released this new policy regarding fixed CPM/CPC deals when using the auction,” said Facebook in a statement to BusinessInsider.  “Our goal is to protect end-advertisers working with 3rd and 4th parties, who may sometimes buy impression/click packages with no visibility on the strategy or conversions. It is important that brands, agencies, all advertisers understand where their dollars go and have a specific strategy when buying Facebook media.”

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