Facebook has confirmed that it's launching a real-time ad exchange, which allows advertisers for the first time to target audiences on Facebook using their own first-party data and data from third parties.
Now advertisers will be able to pinpoint web users who've visited travel sites and scoured rates for a Puerto Vallarta vacation but didn't pull the trigger on buying a trip and then show them a Facebook ad to remind them of their previous intent. It's a way for intent to finally be layered onto Facebook ads and to potentially make it more appealing for direct-response advertisers in categories like travel, hospitality or education that shovel money to Google for paid search ads.These aren't the social, brand-focused "sponsored stories" that appear in user news feeds, but the display "marketplace" ads that appear on the right rail, the closest thing to traditional ads on the social network.
Facebook Exchange will debut in the next few weeks, and eight DSPs and retargeting firms will be cleared to buy the inventory: TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, The Trade Desk and AdRoll, according to spokeswoman Annie Ta.
The third parties will sync the cookies they've dropped on users with a Facebook cookie to anonymously serve ads to users, but no Facebook targeting options can be layered on top of their buys. Advertisers will only be able to tap into the inventory through the eight third parties, said spokeswoman Annie Ta. News of Facebook's exchange was first reported by Bloomberg.
AdRoll President Adam Berke said the arrangement with Facebook will operate much the way that company's retargeting of first-party traffic on Google, Microsoft, or Yahoo's display networks currently works. "We think it's going to add a lot of value to Facebook inventory the way it's added value for other display inventory sources," he said, noting that retargeted ads tend to have higher click-through rates.
But it's not just about retargeting someone who may have visited a brand's site and is now logged onto Facebook; it's also about reaching segments of people whose demographic profile is a match with the typical buyer of the brand's product or service.
Advertisers want to target people in those segments in real time wherever they are on the web. But they haven't been able to reach those people on Facebook up to now with a single cross-platform media buy, says Mike Baker, CEO of Dataxu. "Facebook's sort of been a walled garden up to now," he said.
The launch of Facebook Exchange also represents a sea change in Facebook's attitude toward advertising, since the company has historically urged marketers to buy ads that point within Facebook for purchases. It's also significant since Facebook's IPO roadshow was all about touting the performance of socially-layered and premium ad products, with marketplace given relatively short shrift.
"It's opening up ad inventory to performance-type advertisers like Amazon and Ebay who want to direct advertisers back to their websites to make a purchase," said eMarketer principal analyst Debra Aho Williamson. "We bash the marketplace side, but clearly they think there are legs to it. This business we love to hate maybe is more important than we thought."
Dave Williams, CEO of the Facebook Ads API partner Blinq Media, thinks the move is an opportunity for Facebook to drive up the value of its effective CPMs, since it has the potential to make bidding on the platform more competitive and also to increase the perceived value of ads to the bidders on the back end. "As advertisers are able to get closer to that user intent and further down into the purchase funnel, it's going to drive up conversions and also the value of the inventory," he said.
The matching of Facebook's user data with outside sources is sure to raise privacy issues. Facebook said users will be able to opt out of ads from specific third parties, though not out of seeing display ads bought with third-party data altogether.
"Between the additional data and real-time bidding, this should make buying on Facebook more efficient and targeted," said Bryan Wiener, CEO of 360i. "The challenge will be balancing increased targeted with potential privacy concerns."