Twitter Prepping Ad-Retargeting Exchange to Rival Facebook's

Facebook waited until after its public offering to go after the digital ad dollars tied up in display retargeting with last summer's launch of Facebook Exchange (FBX). Twitter, reportedly planning an IPO for early next year, looks to follow suit -- but perhaps in a different order. The micro-blogging platform is planning to erect an exchange similar to FBX that would let brands retarget people who visit their sites with ads on Twitter, according to people with knowledge of the matter. Twitter did not respond to requests for comment. It's unclear how far along Twitter is in building the exchange, though Facebook managed to create FBX from scratch in a month. In keeping with the company's measured approach to advertising, Twitter is performing its due diligence. Since at least late last year, the company has met with several FBX partners who are well-versed in locating on Facebook people who had previously visited a brand's site and retargeting them with non-standard display ads on the social network, in hopes of luring them back to the brand site. It works by by pinging a partner when a cookied user visits Facebook so that the partner can bid to target ads to that user on the social network. The talks are early but ongoing, and Twitter has not briefed potential partners on a planned launch date. Twitter would also like brands to buy directly on the exchange and has reached out to at least one, a multichannel retailer, per an executive familiar with the matter. That Twitter would offer a seat on the exchange to a brand marketer (as opposed to only allowing advertisers to buy inventory only through an intermediary, as on FBX) isn't unprecedented. Brands such as Procter & Gamble and Kellogg's have held seats on Yahoo's Right Media, and Right Media even implemented a requirement in early 2012 that brands hold a seat on the exchange to access its inventory. In the cases of P&G and Kellogg's, the brands' seats served as a proxy for the bidding platforms they used to do the actual buying. With an exchange, Twitter would benefit from advertiser's growing adoption of display retargeting and, more broadly, the practice of buying online advertising through exchanges via automated real-time auctions. "More advertisers today are ready to make bigger bets with retargeting and exchange-based buying because they're up to speed with Facebook or Google or Yahoo or AOL. The fact that some of the major advertising publishers have been doing that for a little while means that new players to the market can court advertisers with some experience doing this," said eMarketer's VP-communications Clark Fredricksen. Facebook paves way The success of FBX, in particular, would help Twitter's pitch to buyers. Facebook's platform has helped reconcile two of online advertising's biggest trends -- automated buying and non-standard ad units. Last fall FBX partners said they were seeing higher conversion rates at lower acquisition costs than other exchanges, and earlier this month social-ad firm Nanigans said the FBX ads running in users' desktop News Feeds (likely most comparable to Twitter's potential product) return a 48.4% lower cost-per-click and 17 times higher clickthrough rate than the FBX ads running in the more easily overlooked right rail. However Twitter could suffer from comparisons with Facebook. For example, FBX reaches more than a billion people, making it more likely to find someone who recently visited a brand's site, which helps explain its rapid adoption. Facebook Chief Operating Officer Sheryl Sandberg said during the company's earnings call in January that 1,300 advertisers are cumulatively purchasing a billion impressions a day using FBX, and one FBX partner said earlier this month that the exchange accounts for one out of every three real-time bidding impressions it buys. Twitter's 200 million-plus active user base is significant, but relatively less of a catch-all. Karsten Weide, VP of digital media and entertainment at IDC, said advertisers might need to dial down their expectations because of Twitter's size relative to Facebook's. But, he said, "Twitter is big enough to enjoy some of [the RTB interest FBX has opened up]. I think it will work well for them." Higher prices? Twitter's typical strategy when rolling out a new ad-targeting feature is to claim it's not increasing the number of ads in users' feeds. If that's the plan with the exchange, the law of supply and demand could mean higher pricing for direct-response advertisers accustomed to FBX's bargain rates. However the contrast might not be that stark, assuming Twitter's retargeting ads fetch bid prices similar to FBX's higher-priced in-feed placements. An ad exchange wouldn't be the first time Twitter borrowed from Facebook's ad-product playbook. Although Twitter was the first of the two social networks to show ads in users' feeds and to offer keyword targeting, it has also introduced a number of ad products over the last year that Facebook had previously launched, such as interest-based targeting, an ad API and the opening up of its self-serve platform. And last week Bloomberg reported that Twitter may launch its own take on Facebook's Custom Audience targeting option that allows marketers to aim ads at users in their customer databases. Whenever Twitter decides to introduce that customer-targeting option and an exchange, the company's ad revenue ought to see a significant boost beyond the $582.8 million eMarketer has estimated it to reap this year and the $950.0 million it's projected to receive next year. That could help the company avoid any pre-IPO pushback or at least stanch any potential post-IPO sell-off. "This is great news. Twitter has been kind of slow to roll out advertising. They've been around for a while, and their advertising revenue is still kind of small. If there's going to be a TWX or TX [to borrow Facebook's nomenclature], then it's going to be right on the money," said Mr. Weide.

Twitter Prepping Ad-Retargeting Exchange to Rival Facebook's

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