Facebook already serves ads based on users’ interests—like say if they claim to be a Dodgers fan. But soon it’ll be able to deliver ads based on whether a user just visited page to pick up Dodgers tickets but bailed before buying.
Perhaps under pressure to expand its revenue offerings as a newly crowned public company, Facebook has further embraced programmatic, data-driven advertising. The company has begun testing the Facebook Exchange, which will bring real-time bidding to the social network’s ad platform and let brands run ads based on users’ browsing behavior outside of Facebook. The Facebook Exchange will launch in the coming weeks, said Facebook spokesperson Annie Ta. Bloomberg first reported the news on Wednesday.
Here’s how it works. A user fires up their browser and logs onto Facebook. At that point Facebook drops a cookie on the user’s browser, essentially saying “Hey, this person has logged onto Facebook.” As the user roams the Web outside of Facebook via the cookied browser, one of the exchange’s eight demand-side platform (DSP) partners can drop its own cookie, which can be then be matched up with Facebook's cookie (though the DSP does not receive data from that users personal Facebook page).
Then when the user returns to Facebook, the DSP can bid on a CPM basis to target that user. The winner gets to run a targeted “marketplace” ad, which is typically the display inventory alongside the right rail of a nonpremium Facebook page (that is, not on the Facebook home page). For example, a user who recently visited Motortrend.com might encounter an ad promoting SUVs. It should be noted that in some cases Sponsored Stories in the News Feed can also be marketplace ads, but Facebook isn’t initially selling Sponsored Stories (one of its marquee ad placements) through the exchange.
Initially, Facebook is working with eight DSPs: TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, TheTradeDesk and AdRoll. Facebook said it may add new partners down the road. (Facebook has taken measures to make sure that its DSP partners cannot recognize a Facebook cookie once and then perpetually run ads against that user).
Users have some say in this as well. They can opt out of the exchange retargeting by clicking a X button appearing in the top-right corner of an ad, which leads them to the website of whichever DSP has been involved in the targeting. They can also choose to hide an ad and tell Facebook why they don’t want to see it (it’s boring, it’s offensive, etc.).
To be clear, Facebook isn't handing all of its non premium banner inventory to DSPs. Bids from the Facebook exchange will compete against self serve advertisers and companies that buy that right-rail ad space directly. Those competing advertisers, armed with Facebooks more robust data, could very well outbid DSPs for specific inventory aimed at reaching a given user at a given time.