Facebook Exchange To Allow Real-Time Bidding For Sidebar Ads

Whether you’re pro- or anti-Facebook, you certainly can’t accuse the social network of ignoring its issues. Continuing to hammer away at its potential shortfall in advertising revenue, Facebook will introduce a new service called Facebook Exchange, which will allow advertisers to bid in real-time for ads on the social network, according to reports.

Bloomberg reported that Facebook Exchange will launch within weeks, and the service will allow advertisers to target specific types of Facebook users based on their browsing histories with pricing to be based on cost per thousand viewers, and spots to be sold via third-party technology partners.

TechCrunch pointed out that Facebook Exchange covers traditional Facebook sidebar ads, but not sponsored stories or mobile, and it offered this guide to how Facebook Exchange will work:

  • A user visits a travel site that hired a demand-side platform (one of the third-party technology partners listed below) supporting Facebook Exchange.
  • A cookie is dropped on that user’s computer, typically when they have shown purchase intent.
  • If the user fails to make a purchase, or the advertiser wants to market to them more, the DSP contacts Facebook and gives them that user’s anonymous user ID.
  • The advertiser pre-loads creative for ads targeting that user.
  • When the user visits Facebook, the social network recognizes the cookie dropped by the DSP.
  • The DSP is notified and allowed to make a real-time bid to show the user ads.
  • The DSPs with the highest bids get their highly targeted ads shown to the user.
  • If the user disapproves of being shown the ad and clicks on the X button, the user is shown a link to the DSP, where he or she can opt out of future Facebook Exchange ads.

Examples of what types of ads will be offered via Facebook Exchange included:

  • Users who have done research in preparation for a potential trip to Hawaii will be served ads promoting Hawaiian hotels.
  • A sports apparel company seeking to reach fans on Facebook in the moments after the last game of the National Basketball Association Finals could prepare ads highlight the Miami Heat and Oklahoma City Thunder and choose which one to run depending on who wins the game.
  • Ford could drop a cookie on a user who looks at the new Escape SUV on its website, but doesn’t request a local quote, and the automaker could then bid to show that user ads stating, “Ford Escape: Just $21,000,″ which would be more relevant to that users than generic Ford ads showing other vehicles he or she might not be interested in.

Facebook’s third-party partners in Facebook Exchange will include TellApart, Turn, Triggit, DataXu, MediaMath, AppNexus, The Trade Desk, and AdRoll, Facebook Spokeswoman Annie Ta told Bloomberg.

eMarketer said Facebook already leads the overall U.S. display ad market with a 14 percent share in 2011, up from 11.5 percent in 2010 and expected to climb to 16.8 percent in 2012. In contrast, eMarketer expects Google‘s share to reach 16.5 percent in 2012, up from 13.8 percent in 2011 and 12.1 percent in 2010.

According to eMarketer, the overall U.S. display advertising market — which includes spending on ads bought through real-time bidding systems — grew 25.2 percent to $12.4 billion in 2011, and will rise to $15.39 billion in 2012.

Readers: Do you think Facebook users will balk at having to go through the social network’s third-party partners in Facebook Exchange to opt out of these ads, rather than being able to do so within the Facebook environment?

Image courtesy of Shutterstock.

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