Facebook today begins a test allowing its unique targeting data to be used for mobile advertising in third-party apps and sites, according to TechCrunch.
Essentially, Facebook will serve as an “ad exchange layer,” as TechCrunch calls it, that will add demographic- and interest-based targeting capabilities to traditional mobile exchanges that bid for placements on mobile ad networks. Many have wondered whether Facebook would create its own third-party ad network, but for this test, it’s feeding into some existing networks rather than competing directly. If the test shows promise, we imagine Facebook might ultimately build out its own mobile ad network.
For this test, TechCrunch says advertisers will be able to work with Facebook and set a bid for a particular demographic. Facebook will sync its anonymous user IDs with a number of mobile ad exchanges — companies like Mobclix or Nexage, for example, though Facebook didn’t identify its beta partners. When someone visits a particular mobile app or site on an iOS or Android device, the participating exchange will check to see if the user’s ID has a bid set to target them. If so, Facebook will pay the exchange a portion of the bid and the user will see an ad, which will look like traditional banners or interstitials linking to a mobile website or app download page. Publishers do not need to be using Facebook login for this to work, but the user will need to be signed into Facebook on their phone.
The images below show the type of ads that could be part of this trial, but they are simply examples and do not represent the advertisers or publishers involved with the test.
The ads that are part of this test will not include social context about whether a user’s friends are connected to the advertiser. Although these details can improve ad performance on Facebook.com, they might be jarring for users to see outside the Facebook environment. To avoid privacy scandals during the initial trial, it makes sense for the company to show restraint here. However, the future potential of combining Facebook targeting with social context on platforms or sites besides Facebook.com is likely very interesting to advertisers.
In June, we discovered the first hints of a Facebook ad network when Sponsored Stories and other Facebook ads began appearing on Zynga.com. At the time, the social network said it would not be showing ads on other sites. Facebook already has so much desktop inventory, it might not make sense for the company to launch a display network at this time. Instead, it created Facebook Exchange to bring cookie-based retargeting ads to Facebook.com, filling up some of that inventory. As users shift to mobile, though, Facebook can’t deliver as many ads in its own apps or mobile site without infringing on user experience. With the test announced today, the company can reach more mobile users, while improving the targeting options for existing ad exchanges. These ads can also be more disruptive than Facebook would allow on its own properties since users will not be likely to associate the ads with the social network.
Today’s announcement could instill more confidence among investors who have wondered how Facebook will make money selling ads on mobile devices. We’d point out that in the future, Facebook data could be used to help target advertising on many more platforms, including connected TVs or digital out-of-home advertising. Anything with a display could end up being inventory for a future Facebook ad network.