Facebook Exchange; a real-time bidding ad system where visitors to third-party websites will be shown real-time bid ads related to their web browsing based on their cookie data is currently being tested by Facebook and is to be launched shortly. With a view to improving the specificity of ads and making direct advertising more relevant, these ads will be displayed based on visits to the most recent websites when users return to Facebook. Expected to be a huge revenue generator as big premiums will be paid by advertisers for highly-accurate targeting, Facebook Exchange is currently in the testing phase with eight advertising demand-side platforms (TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, TheTradeDesk, and AdRol).

So what does this mean in non AD LAND digital marketing language you ask? It means advertisers can use real time bidding to build audience pools outside of facebook then advertise them creative related to the external factors inside facebook. Got it?

Though users will have the option to opt out of Facebook Exchange via third-party demand-side platforms, opting out of the program completely from within the social network is not possible right now. The feature will be rolled out in the next few weeks for traditional Facebook sidebar ads charged at cost-per-thousand-impressions. However, this will neither be extended to mobile nor Sponsored Stories. Facebook Exchange or FBX as referred to internally may also fuel time-sensitive advertising as these ads are delivered to users in real-time during their browsing activity. With this new feature, users may see ads directing them to a live sporting event or a TV show. Though viewed as a hub for institutional or brand advertising, direct marketers have not benefitted from Facebook. This is because when compared to Google where the purchase intent is a lot stronger, users do not focus on making any purchases when they are on Facebook.

The social media juggernaut confirmed that users will not be offered an easy one click option to deny Facebook the ability to target them based on cookies from all DSPs. This is because Facebook has no control over whether DSPs would drop cookies or not, although Facebook alone can decide whether they would like to use these cookies. This is a slightly more aggressive advertising mechanism that they have in place and the goal is to make Facebook Exchange ads the same as any other retargeted ads around the web. The privacy protection in place is also pretty strong as Facebook will not allowing retargeting to be combined with their own ad targeting data.

Estimates suggest that Facebook’s share will grow to 16.8% of the predicted $15.39 billion market in 2012 if Facebook Exchange gains traction. The company already leads the overall display advertising market in the US. The social network’s share of market revenue grew from 11.5% in 2010 to 14% in 2011 which totaled $12.4 billion. This dramatic move from ad targeting based solely on user-entered personal information and interests to both browsing behavior and activity within apps means that users will not see more ads that are not just annoying distractions but are for products that they would actually like to buy and services that are on the lookout for. The combination of demand generation and fulfillment using Facebook Standard Ads and FBX ads will definitely have a positive contribution to the long-term health of the company.

We are on the tester list.. waiting to give it a try 🙂