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Facebook Ad Exchange: A Game Changer?

The Wall Street Journal got wind of a potential game changer for Facebook’s revenue stream.

Facebook is opening its own Ad Exchange.

To this point Facebook has been a walled garden: the only way to advertise was through their ad platform, with their ad formats, targeting and pricing. By opening an ad exchange anyone currently running display advertisements anywhere will soon be able to run those ads on Facebook opening up that walled garden.

Importantly, this not only creates a huge new ad exchange with a single quality publisher, it allows those ads to be behaviorally targeted to users based on browser behavior. Those pants that follow you around the internet will now follow you onto Facebook as well.

Arguably this is a big win for display advertising, giving advertisers access to a huge number of eyeballs with a greater array of far more powerful targeting options.

There is a question in my mind of how big a deal this is for advertisers. Conceivably, whether the frequency cap of exposures to retargeting messages is used on Facebook, or ESPN.com, it seems like you’re reaching the same audience, just in a different context.

Nevertheless, this is a potentially big deal for Facebook’s revenue. Not clear whether they will make more money serving exchange ads at auction, or serving ads from their own platform. What is clear is that when the ads are better targeted through behavioral mechanisms and RTB they will provide better results for advertisers and that will create a more sustainable revenue stream for Facebook that is potentially larger as well.

Only a handful of DSPs will have access to the Facebook exchange in test mode including RKG’s partner. Word on the street is not many DSPs can handle the volume of ‘requests’ Facebook offers so only the top tier can play until others step up their game.

Big big news!

Postscript: we got the heads up about this a few days ago, but were respecting FB’s desire to hold off on the announcement until Friday. It looks like they decided to let the cat out of the bag early.

Comments
2 Responses to “Facebook Ad Exchange: A Game Changer?”
  1. Dylan says:

    I sense some panic in Facebook and here is why:

    I am seeing my FB ads getting approved much more quickly and also seeing many ads that seem to not having been approved in the past.

    Facebook Exchange is a really exciting move, but I just hope they are not doing it out of panic but rather long term strategic thinking.

    One thing for sure, I am happy to see them willing to test different ways to monetize their platform, which is a great thing for advertisers.

  2. Thanks for your comments, Dylan. An exchange is complex enough that I have to believe this wasn’t thrown together in response to falling stock prices. This has to have been in the works for many months. I agree that it’s an exciting development. If it’s true that 1/4 of the display impressions served are served on Facebook, getting access to that with more robust behavioral data included should be a big win.