Facebook Exchange Opens with Promising Early Results from Launch Partners

By Erin Griffith , written on September 13, 2012

From The News Desk

Facebook launched testing on its own realtime bidding ad exchange earlier this summer; today the company officially unveils the new product. It has allowed its launch partners to discuss their results, and they are solid. For display ads, that is.

The ad exchange is a smart step for Facebook to goose commodity display ad sales in the near term, while the company hunts elephants, aka slow-moving brand advertisers, for its newer, pricier brand-focused ad units.

Up until this year, Facebook's ad revenue came largely in the form of banner ads along the sides of its pages. Almost no one looks at them, even though they are highly, highly targeted. After all, users have freely given Facebook all the information it needs -- their age, gender, location, education level, relationship status, political views, and favorite TV show. That's the kind of audience that data marketers pay out the ear for. The problem is, no matter how well-targeted a banner ad is, it's still a banner ad. We're blind to it.

That's why Facebook built new ad products in the form of Sponsored Stories. These branded status updates are technically "content", created with the goal of engaging users around a brand, not on pushing them to a direct sale. More importantly, it lives in the middle of the news feed. With this ad unit, the company hopes to offer more than just good targeting to its audience, and charge more for it in the process.

The problem here is that Facebook faces an uphill battle in luring those big ad plays over to these units. They're not in a hurry to pour money into a new, untested strategy, and advertisers don't take massive changes to their media mix lightly. Further, Madison Avenue is skeptical about measuring the return on their investments in Facebook's newfangled Sponsored Stories. They have been doing things a certain way on the Web and would very much appreciate it if this new unit would fit seamlessly into their ROI models.

Witness a similar phenomenon in audio advertising, where Pandora has begun reporting monthly listening hours in terms comparable to its terrestrial counterparts. It's a clumsy backward-engineering of a new medium into an old measurement system, and the company has begrudgingly found that it's the only way to convert radio buyers to digital.

Facebook's most ardent supporters do not believe highly targeted display units are the future of Facebook's advertising. But while Facebook waits for Madison Avenue to buy into Sponsored Stories, it made a very rational decision: Let marketers buy and sell ads the way they're used to. That's the idea behind Facebook Exchange, which launched private testing with a handful of partners in June. The exchange allows partners to take the third party browsing data they have on you (blame the cookies!) and merge it with the data Facebook has on you. Before this, the largest website in the world was closed to this kind of targeting. Now, the ad that follows you around the Internet can also follow you onto Facebook.

Thank launch partners TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, TheTradeDesk, and AdRoll for telling Facebook about that packed shopping cart you abandoned on One of those launch partners, Triggit, shared some very scant but positive conversion figures about the exchange with me. Brace yourself:

At night, Facebook's display ads increase in click-throughs by four times. Click-throughs convert to sales 2.2 times more frequently. We may be on Facebook all day, but we are more open to advertising and more likely to shop in the evening. In its short time in "alpha", Triggit saw an 18 to 30 percent increase in conversions with ads targeted on FBX. Cost per acquisition fell by 6.5 times. Conversions on FBX are faster, too -- a sale is twice as likely to happen in the first two days compared with traditional display.

Triggit can't say what baseline numbers those increases improve upon, but let's assume that Facebook's click-throughs are in line with the rest of the web. One report claims they are lower by half. That's still a mere .1 percent for clicks.

FBX is initially only open to Facebook's traditional banner ad formats, but Triggit is planning for more. "We expect to see them innovate," says Christina Park, head of marketing at Triggit. "We're hoping a native advertising format on Facebook exchange will be a reality really soon, and maybe even opening up to mobile."

[Image via AdExchanger]