Facebook Launches New Retargeting Alternative to FBX

Targeting to Use Tracking Software That Marketers Can Attach to Websites and Mobile Apps

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Facebook is launching a new retargeting tool that will allow retailers to show ads to people who've visited their websites or mobile apps.

The targeting feature, "website and mobile app custom audiences," is distinct from Facebook's FBX ad exchange and won't include demand-side platforms like Turn, AdRoll and Triggit that have made retargeting to Facebook users via FBX a pillar of their business.

It will work when marketers affix tracking software -- which is already being offered to direct-response marketers -- to their websites and apps.

A likely carrot for advertisers to try Facebook's new type of "custom audiences" -- an existing category of ad targeting that enables marketers to use their own customer data like email addresses and phone numbers to match corresponding Facebook users -- is that mobile inventory will be available. By comparison, FBX placements are constrained to desktop news feed and ads in the right rail.

Custom audiences can also be further refined with standard Facebook targeting -- like gender, geography, age and marital status -- which also isn't possible for FBX.

Advertisers looking to target customers who mulled a purchase on their site but didn't complete the transaction have thronged to FBX, due in large part to the size of Facebook's active user base. And some DSPs are generating a lot of revenue from bidding on Facebook impressions that will be shown to their customers' prospects. For example, AdRoll last week announced it had hit a run rate of $100 million and cited FBX as an important driver.

Facebook's cut of FBX, on the other hand, wasn't such a big business as of July. Chief operating officer Sheryl Sandberg said during the company's second-quarter earnings call that FBX accounted for "a very small part" of Facebook's revenue.

But if more direct-response marketers use Facebook native retargeting technology, the social network wouldn't have to share the revenue with partners, meaning it would contribute more to the company's top line.

Targeting beyond FBX
Facebook product marketing manager Scott Shapiro said that he envisions distinct use cases for FBX and the new custom audiences. Since mobile ads can be delivered through custom audiences, he described a hypothetical scenario of Nordstrom showing mobile app engagement ads to people who already have its app installed and had previously used it to peruse shoes to urge them to open it again.

He also said that custom audiences can serve the exact same function that FBX has largely fulfilled: reminding users of a shoe they'd considered buying and linking back to the site where they can complete the purchase.

One facet of FBX that custom audiences can't replicate is the ability adjust the creative shown in ads according to the behavior of the user, Mr. Shapiro said. Facebook's tool also won't have the element of "predictive buying," where a person who's been looking at a set of pink dresses might be shown an ad for red shoes because algorithms predict an affinity.

"That's the number-one reason to keep using FBX," he said. He noted that existing budget allocations and work flows are other possible reasons.

Mr. Shapiro says he foresees advertisers using both FBX and custom audiences.

"A travel client will use FBX to retarget people who've gone searching for hotels and then show them that exact hotel [they saw]," he said. "They'll use custom audiences to reach people who are searching for hotels but have not downloaded their mobile app on iOS 7 on iPad."

As with FBX, desktop ads targeted through Facebook's tracking will be marked with the blue triangle of the ad industry's self-regulatory "AdChoices" program, which provides disclosure and the opportunity to opt out from behaviorally-targeted ads. (It's visible when users click on the upper-right corner of ads to learn more about them.)

Mobile ads targeted based on tracking won't contain the icon, but a Facebook spokesman said "it's something we're working on and will come soon."

An opt-out option
Facebook will also offer user an opt-out from targeting based on its own tracking of website and app visits. (This doesn't include FBX, however; users will still have to opt out from DSPs one at a time if they want to ensure that they see no retargeted ads at all.)

Mr. Shapiro wouldn't rule out opening up mobile ad inventory to FBX in the future but said that infrastructure for real-time bidding on mobile is nascent, and Facebook won't be the company to work out the kinks with measurement and also privacy. He noted that Facebook opted to build FBX -- which officially opened for business in September 2012 -- when the real-time bidding market was already well established.

"We launched our exchange three years after a lot of exchanges launched," Mr. Shapiro said. "They proved a lot of the mechanics out, figured out a lot about how real-time bidding should work. When we decided to do it, we did it very quickly."

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CORRECTION: An earlier version of this story incorrectly stated that FBX ads are targeted using marketers' customer data like addresses and phone numbers. It's actually Facebook's existing category of ad targeting, "custom audiences," that can match marketer CRM data to Facebook users. We regret the error.

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