After a month of less-than-stellar performance as a publicly-traded company, Facebook has just made behavioral retargeting a huge part of its monetization strategy.
And some analysts are saying it could just be the right move at the right time.
Google’s DSP InviteMedia is not on the list, though Google has already been doing just this for some time. Facebook is denying that their intention with Facebook Exchange is to copy the AdSense model.
In a nutshell, here’s how Facebook Exchange will work:
First, the Facebook user visits a merchant site that uses a DSP with Facebook Exchange. A cookie is dropped on that user’s browser when they’ve shown purchase intent. If the user fails to make a purchase, or the advertiser wants to market to them more, the DSP contacts Facebook and gives them the user’s anonymous User ID. The advertiser pre-loads creative for ads that would target that user when he or she visits Facebook again.
When that next visit happens, Facebook recognizes the DSP’s cookie and notifies the DSP, which can then make a real-time bid to show the user ads. The DSPs with the highest bids get their highly-targeted ads shown to the user.
If the user doesn’t want to see the ad and ‘X’s it out, he is shown a link where he can opt out of future Facebook Exchange ads.
Facebook Exchange will not apply to Sponsored Stories or mobile ads.
The new service came as a surprise to some observers. As the blog Inside Facebook put it:
“This type of ad program is a somewhat unexpected development from Facebook. Many have predicted that the social network would one day launch its own ad network to display Facebook ads across the web. This move seems to do the opposite, bringing ads based on web browsing to Facebook.”
An increasing portion of display ad sales are driven by this type of technology. Last year, real-time bids generated $1.07 billion, or 9.8 percent, of display ad sales. Real-time bidding will account for about $5.08 billion, or 27 percent, of the projected $18.9 billion to be spent on U.S. online display ads in 2015, according to researcher IDC.
“Real-time bidding–based display advertising sales will take the online advertising industries in developed nations by storm,” said Karsten Weide, IDC’s VP of Media and Advertising. “By 2015, we estimate that at least one-fifth of all display advertising sales revenue in the United States, the United Kingdom, Germany, and France will be based on RTB transactions. What drives this explosive growth is that both publishers and advertisers win – the former can expect better return on investment (ROI), the latter a better return on advertising spending (ROAS).”
Facebook Exchange could turn out to be a much-needed boost to the company’s financial profile. Facebook’s stock began trading at $38 on May 18 and has gone as low as $25.52 since the IPO. But some observers say this is the right move at the right time.
Eric Savitz, writing for Forbes , says:
“Digital has hit the tipping point. It’s no longer digital marketing. It’s marketing in a digital world. And RTB (real-time bidding) is driving the transformation. What started in display quickly spread to mobile, video and now Facebook. RTB is only a few years old. Right Media, and the DoubleClick Ad Exchange – they were born just a few years ago. But their value belies their age: The chance to eliminate waste in advertising budgets. The ability to easily target audiences across media properties. The reduction in transaction costs associated with manual media buying processes. Who could resist that value proposition?”