On Friday news broke that Facebook had changed its privacy policies to make way for it to create an external ad network.

It’s one of the most interesting developments of the year, but what are the pros and cons of the Facebook Ad Network (FAN*), who will it challenge and what are the questions that need answering? (*My obvious acronym, not theirs.)

So here are my first thoughts and speculation on how it may shape up. Please note I don’t have any inside information; this is based on what’s publicly available and what might be. And I’m basing this on gut instinct, there maybe data out there which says I’m wrong (there usually is).

Pros

Great demographic, interest, ‘psychographic’ data. This is obvious, Facebook has an incredible amount of information about their users, based on what their uses have inputted themselves, and what they do on Facebook and elsewhere on the Open Graph.
Established API-driven marketplace with many 3rd party tool integrations. You need an eco-system to make this kind of network grow. Facebook have this already and allowed many developers to create ad management systems through the PMD programme.
Reduce newsfeed clutter? There’s already a feeling that the newsfeed has become cluttered experience, awash with promoted posts and sponsored stories. This is especially true on mobile and tablet devices. Perhaps Facebook have realised they can only push this so far, and need to find more ad space?

Cons

Proprietary ad format. Facebook ads are their own proprietary format, and pretty much every publisher and advertiser hates that. Google AdSense has expanded to cover most standard ad formats and dimensions, text ads are usually the backfill these days.
Privacy concerns. Well duh.
Pricing. “The Facebook Exchange works so well because the inventory is cheap” is pretty much what one DSP said to me. There’s so much inventory on Facebook that ad costs are low (though creeping higher). Great for advertisers, not so great for publishers – and that’s who Facebook would be selling FAN to first, not advertisers.
Advertiser depth. Pricing is partly a function of the number of advertisers in the system. When Google switched Adsense on, they had the ecosystem and a huge pool of advertisers. Facebook only have the first part of this.

Losers

Data providers / cookie resellers. Buy ads on the FAN, and you get the audience data as part of the price. No need to buy it in on top.
Publishers? Publishers losing control of their audience is a step back. How can they bake in their own 1st party data to keep value of their proprietary audience segments.

Questions

Global frequency capping? God knows some frequency capping is needed in newsfeed. I get bombarded by the same ads every day, for weeks and months.
Great mobile opportunity? Most Facebook users are accessing it on their phone, and the mobile ad opportunity is still wide open. Not sure how this is achievable technically though. For example, I understand cookies set in an iOS app are not available to the mobile Safari browser.

I’d love to hear your thoughts in the comments. I’m sure Google are looking at this carefully, but I don’t think they’re losing any sleep yet.