‘Facebook Exchange’ retargeting system will bring intent-based ads to the site

Facebook is testing a new advertising system that will allow third-party platforms to place retargeting ads on Facebook after users visit external websites marked with cookies, according to TechCrunch.

The program, called Facebook Exchange, could bring a large influx of new inventory to the social network and give Facebook the intent-based targeting data it previously lacked.

Eight demand-side platforms — TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, TheTradeDesk and AdRoll — are involved in the test. The program will be more widely available for traditional Facebook ads on the right-hand side of the page within the next few weeks. Facebook Exchange will not apply to Sponsored Stories or mobile ads.

TechCrunch reports that when a user visits a site that has hired one of Facebook’s partner platforms (DSPs), a cookie will be placed on that user’s browser when the person reaches a stage that implies purchase intent. If a user does not complete a transaction, the DSP will be able to bid on retargeting ads that appear on Facebook when the user visits the social network. According to AdExchanger, these ads will go through the same review process as traditional Facebook ads.

After being served a Facebook Exchange ad, users can opt-out of future retargeting from individual DSPs, but they cannot opt-out of the program completely, TechCrunch says. Facebook may also be able to continue to use information from those cookies to target other ads to users, even if they deny DSPs the option to target them this way.

This type of ad program is a somewhat unexpected development from Facebook. Many have predicted that the social network would one day launch its own ad network to display Facebook ads across the web. This move seems to do the opposite, bringing ads based on web browsing to Facebook.

DSPs are likely looking forward to being able to serve ads on Facebook, where users spend an extraordinary amount of time. However, Facebook puts a number of limitations on the size and format of its advertisements, and it remains to be seen whether the creative constraints will affect the impact of a retargeting campaign. Further, none of Facebook’s own targeting options will be available to DSPs, AdExchanger reports. This means that a travel website can retarget a user who searched for a flight through a DSP partner, but it cannot layer on Facebook targeting parameters, such as demographics, Likes or interests.

Traditional Facebook advertisers — those using the self-serve tool or the Ads API — might see bid prices begin to rise as DSPs compete for inventory. Since these DSPs will be retargeting users who have already shown purchase intent, they are likely to be wiling to pay more than advertisers previously have on Facebook.

Overall, Facebook Exchange could be a key way for the social network to improve its effectiveness as an ad platform and increase revenues. The company’s stock has taken a large hit, as investors question its potential to monetize. Facebook shares closed at $27.27 today, down $0.13 from Tuesday. News about Facebook Exchange broke after trading ended.

Facebook has not yet responded to requests for comment.