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Real-time Bid Ads in the Social Cosmos – Facebook Goes RTB

Facebook is currently planning the launch of Facebook Ad Exchange in Europe, allowing advertisers to target users even more efficiently within the social network, trading display advertising space automatically by auction. With a total volume of 12.4 billion dollars (as of: 2011) the social network is already the leader in the U.S. display advertising market. With Facebook Exchange, the platform guarantees that in the near future the user will only be shown ads for products that really interest them.Based on advertiser data, second-party data, and third-party data, targeting campaigns (retargeting and search-retargeting) can now also work on Facebook. Impression tracking allows agencies to develop new attribution models and conduct advertising impact and ROI studies, which takes Facebook inventory into account.

A few weeks ago Facebook announced it is testing the Exchange with eight demand-side platform providers: TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, TheTradeDesk, and AdRoll. Two weeks ago they also approved Xaxis.

This is how it works: users are– marked with a cookie on advertisers websites while surfing the Internet, and as soon as they log into Facebook they are recognised and shown relevant ads. This allows advertisers to buy Facebook display ad inventory on impression level in real-time, while distributing advertising mediums even more effectively on the social advertising platform.

The available inventory will initially be limited to traditional sidebar ads. Sponsored Stories – notifications of page updates, check-ins at places, likes, and user activities within applications – and the mobile market are not presently included.

So, if a user visited a site but did not complete the purchase, the advertiser can offer the product to that specific user again on Facebook.

How Facebook Exchange works using the example of a travel agency:

  1. A user visits a travel site that has hired a demand-side platform (DSP) connected with FBX.
  2. A cookie is dropped when the user has shown purchase intent.
  3. If the user did not complete purchase, or if the advertiser wants to address the user with a supplementary offer, the DSP contacts Facebook and gives them the anonymous ID of the user they whish to target.
  4. The advertiser pre-loads the appropriate advertising material for the targeted user.
  5. When the user visits Facebook it recognizes the cookie dropped by the DSP.
  6. The DSP is notified and allowed to make a real-time bid to show the user the ad.
  7. The DSP with the highest bid gets the advertising space.
  8. If the user does not want to see the ad and clicks on the “x”, he will be shown a link to the DSP where he can opt-out of future Facebook Exchange ads.

So far advertisers have been rather critical of Facebook, as within the social network users have shown little purchase intent, unlike when searching keywords in search engines. FBX could change all that.

If a user has already looked at a specific article on a website, general interest in this product exists. This forms the baseline to retarget the user with highly relevant ads via the social network, i.e. if they offer a discount for the article viewed by the user, or if they can offer similar products. Moreover, FBX can also be used to place time-limited advertisements quickly and effectively, to draw attention, for instance, to TV shows or events.

Although retargeting is common across the web, the new advertising format in the social network may make users feel uneasy with regard to their private data. However, for data protection reasons, Facebook will prohibit advertisers, from using cookie retargeting and collecting extensive private, biographical, and behavioral data. Nevertheless, some users will still use the “third-party opt-out” of the demand-side platforms to stop receiving cookies.

Since Facebook has prohibited advertisers from combining retargeting data with the targeting data of the social network, the new advertising format isn’t violating any privacy policies and is fundamentally not much different from other retargeting measures on the Internet.

Facebook’s new targeting initiative should make the network more attractive for advertisers. While just a year ago targeted-ads were only possible based on profile information (interests, personal information), now also browsing behavior and activity within apps (playlists via Spotify) can be integrated, increasing advertising relevance and reducing scattering losses. This will delight advertisers since it will lead to higher click-rates; therefore it is worthwhile looking into this topic.

Facebook Exchange now launches in July in the USA. As soon as this service is available in Europe, advertisers will be able to use the social networks’ new advertising format with QUISMA via the QUISMA Media Platform.

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