Thursday (Februrary 28) after the close Facebook Inc (NASDAQ:FB) announced it has agreed to purchase Microsoft’s Atlas ad serving and analytics business. Terms of the deal and the expected closing date were not disclosed. Microsoft Corporation (NASDAQ:MSFT) acquired Atlas as part of its 2007 purchase of aQuantive.
According to press reports the price was less than $100 million and will not be material to Facebook financials. Atlas allows advertisers to plan campaigns, buy ads, and measure their impact across the web, including on Facebook. Facebook Inc (NASDAQ:FB) may gain some new customers that are currently using Atlas, but most Atlas users are likely already using Facebook. It’s possible that Facebook will make Atlas tools available for free to all Facebook advertisers after the deal closes (similar to Google Analytics).
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Making a case for allocation of more media dollars to Facebook
Atlas provides detailed bottom-funnel conversion metrics across search and display advertising, and the sales lift from specific display publishers (such as Facebook) can be quantified. By combining Atlas data with data from Nielsen and DataLogix, Facebook Inc (NASDAQ:FB) may hope to provide advertisers with improved visibility exactly how their Facebook ads are performing. If Atlas tools can help advertisers better measure their Facebook spend (Google has best of breed at analytics capabilities), and the spend does provide high returns, the company can make a case for increasing budgets on Facebook. The promotion of analytics tools to advertisers would suggest that Facebook Inc (NASDAQ:FB) management has confidence that ad spend on the platform generates high returns.
Acquisition could help with an Ad Network launch
Atlas also provides Facebook Inc (NASDAQ:FB) with ad technologies that could be used to help launch an Ad Network and measure its impact. While Facebook had announced its intention to launch a mobile ad network (similar to Google Inc (NASDAQ:GOOG)’s Adsense network) earlier in 2012, Facebook Inc (NASDAQ:FB) put a brake on its roll-out in December. The company said that it will focus on scaling ads in FB mobile news feed before working on ads off of Facebook. We see opportunities for a successful FB Ad Network as the company can leverage the data it collects on its 1 billion users, although competition will be strong from Google Inc (NASDAQ:GOOG), AOL, Inc. (NYSE:AOL), Amazon.com, Inc. (NASDAQ:AMZN) and others.
FB stock has been weak lately likely due to insider selling, ongoing concerns on the mobile ramp and seasonality in 1Q, and a lack of perceived revenue growth catalysts once the mobile ramp stalls. We continue to see an opportunity to generate more revenue per FB user, and analytics tools could help speed up ad dollar migration to Facebook Inc (NASDAQ:FB). We are maintaining our Buy rating and our 12-month Price Objective of $35.