Facebook Exchange

Facebook Exchange or FBX, is a very exciting new tool that Facebook has come out with that can be used to help companies more effectively target ads placed on Facebook. “We love it. We absolutely love it. Massive, massive, massive increase in the amount of exchange traded media.” (Rob Norman, Edwards 2012)  Clearly the program has been very well received by many companies since recently being released from beta testing in September of 2012 and is now quite popular, being used in many companies’ ad campaigns. It is a fairly complicated program and is well illustrated in this diagram.

  As can be seen above, much of the work is done not by FB but by the company using FBX as well as by the DSP. A DSP is a third party company that places cookies in the user’s browser and also has search information gathered from the consumer. Once a potential customer visits a site and reaches a point that indicates intent to purchase, a cookie is placed in that user’s browser. If the user then does not complete the purchase, the DSP will have a chance to bid on retargeted ads on FB. These ads will then show up the next time the user logs into his FB (Darwell).

  This video is made by one of the DSPs that are involved in FBX, it goes into a simple explanation of how FBX works and why it's effective:

This service does have some drawbacks though, the first and most significant drawback is that the retargeted ads use information from the cookies only, they do not use the demographic and personality data that FB already has available. This means that even though the ad will be targeted at a customer that has shown interest in a particular product, maybe even come close to buying it, it will not be targeted according to any other information. So for example, say you are the company Nike, and one of your loyal customers looks at a pair of Adidas shoes online. Even though this customer is loyal, has liked your Facebook page and has not liked Adidas’ Facebook page, the retargeted ads will now be featuring Adidas shoes rather than Nike.

The second major drawback is that when a customer is presented with an ad they can then opt out of receiving targeted ads from individual DSPs. This is obviously an issue since some consumers may find this tactic intrusive and will opt out of every DSP eventually. To help counteract this Facebook has set up the program so that they may still be able to use the tracking cookies to target other ads to users, even without the DSP being involved.

  The final drawback is obviously the required use of third party companies in order to take advantage of this information. Along with this comes the fact that the more DSPs your company uses, the more retargeted ads they can run, since users are able to block individual DSPs. This problem is unavoidable as Facebook does not have the infrastructure to create the tracking cookies necessary for this to work, they must rely on third party programs. The only thing that is mitigating this problem is the large and growing number of DSPs that are available. This large number of DSPs will encourage competition and drive the price of these services down.

These three drawbacks are the only real concern with this new program, and they are all mitigated by other factors. The first problem is only an issue in selected circumstances, generally speaking, the targeted ads will be much better placed than the other ads that use FB demographic information. The second issue is a bit more difficult to fix but it is helped by the fact that FB is still allowed to use the data collected from the cookie even after the DSP has been blocked from that user. The final issue is completely unavoidable due to Facebook’s limitations.

This type of advertising complements communication tools such as Facebook itself quite well, but would also work in similar places such as Myspace, LinkedIn and others, in the way that allows companies to “hunt down” a greater amount of customers than regular advertising tools would. There is a slight opportunity for Facebook to sell this technology to one or more of these businesses but this will more than likely be looked upon unfavourably since FBX is a major competitive advantage for Facebook. The only site that could possibly purchase the technology would be LinkedIn as the majority of LinkedIn users have both a Facebook profile as well as a LinkedIn profile.

Using cross connecting information (the real time bidding), companies can now find out what people are truly shopping for and buying instead of only knowing what they are interested in. With this information companies can seek out consumers on social media sites in a very specific way, potentially offering the customer something they may have been just about to buy but had decided against it. This service almost gives companies a second chance to sell a product to a consumer. The advertisements on social networks have a massive audience, there are currently approximately 845 million Facebook users (and with potential to grow even more in countries such as the BRICs, for instance), obviously this channel has a huge audience that can be taken advantage of and have very specific ads targeted to them. When asked why these advertisements on Facebook would work, Zach Coelius, Triggit’s CEO, said that “ Facebook is a communication utility; it’s something that people always have open, and they’re there. And what we’re finding is that when they do engage with the ads, they’re converting at much higher rates.”

As mentioned before though, companies must be wary of scaring away customers, many find intrusive advertising techniques to be unfavourable and may turn to other products if they feel a company uses their information too freely or has access to too much information - companies should offer their products with marketing strategies and tools, not force people to buy them.

As an example let’s look at a shoe company, Nike, mostly to be consistent with the example used earlier. Jack is a new Nike customer, he has never purchased any Nike apparel but may own a few things gotten through friends or other methods. Jack also has a Facebook account that he uses regularly. As Nike you’ve implemented the FBX, so any customer that comes to your site and shows intent to purchase, will be tagged with a tracking cookie. One day Jack decides he wants a new pair of running shoes and since he would like to make an informed decision he shops around on various websites, such as Adidas, Saucony and Nike. On the Nike site Jack sees a pair of shoes that he quite likes and nearly buys them but decides at the last minute that he should sleep on the decision. The next morning as soon as Jack logs into Facebook one of the first things he will see is that pair of shoes that he was looking at, thanks to FBX. Whether Jack takes it as a sign from above that he should buy those shoes or simply is in a more optimistic mood that morning does not matter, what matters is that he bought the shoes due to that second little nudge from Nike. This example is great at showing where the FBX truly shines, bringing customers over that line between frugality and frivolity.

In the end FBX is an emerging tool that “kind of has everything going for it right now.” (Dax, 2013) It has a massive audience and relatively low barriers to entry, meaning that even smaller companies can take advantage of this tool. The most exciting part of this tool is how new it is, FBX has only been out of beta for a few months, and the industry has yet to see what Facebook and other companies can truly do with this tool. The future of marketing looks very bright if tools such as this continue to be made.

  • Jacob Deviney 06334325
  • Paulo H. Pedrão 10083167


Darwell, Brittany. 13th, June 2012.  ‘Facebook Exchange’ retargeting system will bring intent-based ads to the site Inside Facebook. http://www.insidefacebook.com/2012/06/13/facebook-testing-retargeting-system-that-will-bring-intent-based-ads-to-the-site/

Edwards, Jim. 5th Nov. 2012. Facebook's New Ad Exchange Has 'Quadrupled' The Market; Performs 'Better Than Google.' Business Insider. http://www.businessinsider.com/facebooks-new-ad-exchange-has-quadrupled-the-market-performs-better-than-google-2012-11

Hachman, Mark. 2nd Feb. 2012. Facebook Used by Half the World’s Internet Users, Save Asia. PC Mag. http://www.pcmag.com/article2/0,2817,2399732,00.asp

Hammen, Dax. 23rd Jan. 2013. What is the Facebook Exchange Opportunity? SearchEngineLand. http://searchengineland.com/what-is-the-facebook-exchange-opportunity-145583

Kafka, Peter. 5th, October 2012. “Why the ad tech guys are going nuts about facebook exchange, and why that matters.”

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