Facebook To Roll Out Real-Time Exchange

Expected to debut in a few weeks, the new service called Facebook Exchange would bring intent-based ad targeting to the social network and make the site less of a walled garden for advertisers. An airline, for instance, would be able to show an ad to a Facebook user who had visited different travel sites searching for a flight but didn’t end up booking a trip.

“By bidding on a specific impression rather than a larger group, advertisers are able to show people more relevant ads while also running more efficient and effective campaigns,” the company said in a statement Wednesday.

The ads will be served through eight demand-side partners including AdRoll AppNexus, DataXu, MediaMath, TellApart, Triggit, Turn and The Trade Desk, and will be sold on a cost-per thousand basis. Facebook has started placing cookies on the Internet browsers of its users, which its technology partners will use to identify members of the social network, company spokesperson Annie Ta told Bloomberg.

After being served an ad by Facebook Exchange, users can block cookies from an individual DSP but they can’t completely opt out of this tracking on Facebook. Given the company’s history of privacy-related controversies, it wouldn’t be surprising if the matching of Facebook user data with third-party information raises fresh privacy concerns.

The ads themselves will be the standard “marketplace” ads on Facebook that appear on the right side of the page rather than the sponsored story ads that run in the news feed or brand-oriented premium ads on the site. That means the new exchange will likely appeal mostly to direct-response advertisers hoping to better hone in on specific audiences on Facebook.

Advertisers mainly target users on the site now based on demographic information, interests they post on their profiles, and brand pages they “like.” But Facebook’s own targeting options won’t be available to its DSP partners to layer over the cookie-based data.

As a result of the real-time bidding process, Facebook also expects to deliver users more timely messages. That means, for example, a sports apparel company that wanted to reach fans right after the last game of the NBA Finals could prepare ads geared to the Miami Heat or Oklahoma City Thunder, and choose which one to run depending on the outcome of the game, according to the Bloomberg report.

The new ad offering comes as Facebook faces increased pressure following its May initial public offering to prove that the social network is an effective way for advertisers to connect with consumers. The company’s stock has fallen from its IPO price of $38 a share to a closing price of just over $27.27 as of Wednesday, amid concerns about revenue growth and its ability to monetize its more than 900 million users.

Earlier this week, comScore released a study in partnership with Facebook showing that users exposed to brand messages on the site are more likely to make purchases than those who didn’t see them. In one test, for instance, people who saw unpaid posts about Starbucks on the site were 38% more likely to buy something at the coffee chain within four weeks than those who didn’t. 

If Facebook Exchange works as planned, it could boost ad effectiveness on Facebook while helping the company accelerate ad revenue growth. But it could have the unwelcome side effect of boosting prices for traditional Facebook advertisers as DSPs compete for inventory. 

“Since these DSPs will be retargeting users who have already shown purchase intent, they are likely to be wiling to pay more than advertisers previously have on Facebook,” according to an Inside Facebook post.