Buyers Bullish on Facebook Exchange

15 ad tech firms on board; most rave about platform's potential

News broke in June that Facebook was readying an ad exchange which would enable advertisers to target people of Facebook based on their Web surfing habits on other sites. Facebook had invited a slew of ad tech firms that specialize in real time bidding to run test campaigns via the new exchange, possibly to see which company's technology performs best.

But since then Facebook has instituted a Fight Club-style gag order on its Facebook Exchange (FBX) partners—until now. On Thursday (Sept. 13) FBX rolled out of beta, allowing the group to discuss the program (breaking the rule number one about Fight Club).

Back in June, Facebook had 8 initial FBX partners (not to be confused with the infamous Fox River Eight); now the list is up to 15. The full list follows with asterisks affixed to the original partners: AdRoll*, AppNexus*, Criteo, DataXu*, Kenshoo, MediaMath*, Nanigans, Optimal, RocketFuel, Tellapart*, TheTradeDesk*, Triggit*, Turn*, Xaxis and x+1. Adweek spoke with seven of the partners about their experiences with FBX so far.

“The performance [of ads run on FBX] is exponentially better than anything we’ve ever done,” said Zach Coelius, CEO of original eight member Triggit (see the company's blog post here). In the 13 weeks Triggit has run campaigns for “a couple dozen advertisers” on FBX, “advertisers are seeing two-to-four times better post-click conversion rates [than other exchanges], and they’re seeing six times lower [cost-per-acquisition rates],” he said.

A major reason FBX has thus far proved so successful is that Facebook is arguably the best site on which to retarget users. “Users are always on Facebook and always keep the Facebook page open,” Coelius said. In essence, Facebook is the anchor of peoples' online browsing habits: A user sees on Facebook that a friend is on vacation, opens a new tab to see where they might like to travel to, returns to the Facebook tab to see which friends might live there, opens another tab to check airfares and another to find a new swimsuit.

Until FBX was born, neither that hypothetical airline nor that theoretical retailer could tract that user back into Facebook and target them with an ad. Now, “people convert on Facebook all day long,” Coelius said, which he believes proves that the site is “conducive to commerce.”

Though ads are bought on a CPM basis through FBX, the exchange particularly caters to direct-response advertisers seeking to measure how clicks turn into transactions, said Xaxis CEO Brian Lesser. The audience buying company has worked with eight ad partners on FBX, Lesser said, and one quick-service restaurant saw its cost-per-order drop 22 percent versus similar campaigns it had run outside of FBX.

FBX doesn’t only open up new retargeting avenues for advertisers; it opens up new users altogether, according to buyers. Turn, a demand-side platform that also operates its own data management platform, has run more than 50 campaigns for advertisers—including one for Chrysler that launched Tuesday—through its agency trading desk clients Accuen, Amnet, Mediabrands Audience Platform and VivaKi. Throughout those campaigns, Turn has been able to reach “millions of users on Facebook that we haven’t been able to find anywhere else,” said CEO Bill Demas.

It goes without saying that Facebook maitains a massive Web footprint. Last year the social network delivered 28 percent of total online ad impressions in the U.S., according to comScore

Even during the test period, it hasn't exactly been hard to find demand for that Facebook inventory, particularly given how FBX has been performing. AdRoll has launched FBX campaigns for 60 advertisers, such as Room & Board, Hootsuite and GoPro, and those campaigns’ average ROI is 16 times what they see on more traditional CPC campaigns, reported Adam Berke, president of AdRoll.

Rob Leathern, CEO of Optimal, said a big factor in FBX’s performance “is the fact that advertisers know where their ads are going to show” and that the ad units are “homogeneous.” That contrasts with traditional RTB that could leave advertiser in the dark on whether an ad will run above or below the fold, he explained.

Such consistency may be a boon, but none of the partners are resting on their laurels just yet. Each of the seven that Adweek spoke cited creative optimization as a crucial next step. Because users return to Facebook so often, “keeping the creative fresh is even more important than in standard display,” said Berke, whose company has extended its LiquidAds product to Facebook in order to crawl an advertisers' pages for product names, imagery and pricing in order to better personalize Facebook ads. “It’s something we’ve been doing in display for a long time and now are able to apply for the first time to retargeting on the Facebook Exchange,” he said.

None of the partners are under the illusion that optimizing creative for Facebook is a quick and easy task, but the work is deemed worthwhile. Criteo’s chief buying officer Jonathan Wolf said that prior to working with FBX, the company had stuck to standard IAB ads, but now must grapple with optimize its creative given Facebook’s native ad formats.

Wolf hits on a critical point. As RocketFuel CEO George John pointed out, FBX is “one piece of the overall programmatic buying revolution.” But until FBX, that revolution has been largely in the way companies buy traditional ads. With FBX, “Facebook is allowing itself to be bought in a way the rest of the universe is bought but still retaining that native advertising experience,” John said.

Of course the immensity of Facebook’s inventory supply allows for it to test programmatic buying while still protecting the unique nature of its ads. Not every publisher might be able to get away with such an inflexible position. But John hopes the company has kicked off a trend, at least among the social media giants. "It would be lovely if some of the other social sites look at it as well,” he said, mentioning Twitter and Tumblr as two that have followed Facebook’s native ad example.