How Facebook’s Partner Categories Level the Playing Field—for Good

Narrower targeting could mean more relevant ads, more ad dollars

Facebook would seem to be an ideal ad vehicle for small local businesses. But it's never lived up to its promise. Until maybe now.

To date, a mom-and-pop dress shop may not have be able to justify advertising against a broad audience segment like “18-54-year-old women.” That same store could always add Facebook-specific filters—think“18-54-year-old women who live in ZIP code X (same as the shop’s location) and like dress brands Diane von Furstenberg and BCBG”—to help zero in on a more precise target. But that approach can yield small audiences that garner a lot of demand, and high costs. 

“What happens is the segments with data attract people bidding on those segments. Obviously segments’ prices go up a lot until, like with any keyword, people bid up the price until it gets too high,” said Optimal CEO Rob Leathern. That means local brands often need alternatives.

For deep-pocketed advertisers, that's often meant working with third-party data providers to model their ideal audience profiles, figuring out that many people who live in ZIP code Z actually shop at high-end retail stores and drive a BMW, so the advertiser could target that ZIP code on Facebook. The mom-and-pop dress shop didn’t have access to that kind of insight—until now.

Earlier this week Facebook added a new set of ad targeting parameters, under the moniker Partner Categories, that will let advertisers pinpoint their ads using offline data from providers Acxiom, Epsilon and Datalogix rather than just basic Facebook profile data (e.g., people who like cars). Previously marketers had to work directly with those data providers to access such information, leaving many small and medium-size advertisers in the dark and at a disadvantage. But Facebook has now opened up such rich targeting data to the masses.

“What this will do is democratize ad targeting a bit more,” said Nanigans COO Marc Grabowski. As Spruce Media vp of product Andrew McDermott pointed out, “an advertiser could be paying up to 70 percent of the cost of a campaign just to access a third party’s data, leaving only 30 percent to actually reach them. Facebook is not charging a premium to use this targeting, so 100 percent of an advertiser’s budget can be spent on reaching their core audience.”

By giving all advertisers access to third-party audience segments in addition to the standard Facebook targeting criteria, Facebook is indirectly rewarding advertisers that more narrowly define their targets. “Those who target more will end up winning more inventory than those who target less because they’ll be able to value it at a higher rate,” said Grabowski.

Theoretically more advertisers paying for more targeted (read: pricier) ads will lead to higher overall ad rates for Facebook. “It should drive up the price of the whole. Not double or triple off the bat, but incremental increases over time,” Grabowski said. That should accelerate as data providers like Epsilon introduce new Partner Categories attractive to any holdouts. Epsilon’s evp of online solutions Eric Stein said the company would like to add new segments with specific verticals in mind like retail.

Media buyers might initially gripe at the higher prices resulting directly or indirectly from Partner Categories. That is, until they reap new benefits, such as better refining their target audiences and improving ROI. For example, “It may be great to know based on Acxiom data that these folks are in market and have a high propensity to buy a product or associate with a brand, but then you layer on what individuals have the most friends and get a multiplier effect if they choose to associate themselves with the brand on Facebook,” said Geoff Amborn, Acxiom’s director of partner development.

If the time-worn advertising axiom of “right person, right place, right time” holds, Partner Categories should result in better ad performance. Because Facebook is able to match third-party data with people’s actual email addresses and phone numbers, McDermott estimated that “they could potentially match this third-party data at upwards of 85 percent, enabling advertisers to reach significantly more people.” That could create a cycle of more Facebook ads being targeted through Facebook data and Partner Categories, to the point that all Facebook ads are so narrowly targeted that fewer and fewer impressions are wasted.

Which brings us to Twitter. The social platform has been strict with the ads it allows into users’ streams, limiting overall ad volume and even pulling ads if they’re not performing.

Thus, advertisers have to stay on top of their Twitter campaigns. But theoretically, with the inclusion of third-party audience segments along the lines of Facebook's Partner Categories, it could result in much more effective and manageable Twitter campaigns.

Asked if Epsilon would bring its third-party data to Twitter or other social platforms to augment ad targeting, Stein said, “We’d love to circle back as those things come to fruition.”