During a session with reporters at Advertising Week in New York yesterday, Facebook ad sales boss Carolyn Everson said she expects the Facebook Ad Exchange, called FBX, will “unlock a significant amount of spending around the globe.”It was an unusually bold prediction.
Facebook would love to show investors that it can re-accelerate its revenue growth, but it also wants to keep short term expectations in check.
FBX is an exchange where third party ad resellers buy Facebook inventory, categorize the inventory using their own data, and then sell it on to advertisers.
The really exciting thing about FBX is that through it, advertisers can finally buy inventory on Facebook in a way that has been working elsewhere on the Internet for years now – through a method called re-targeting.
With re-targeting, advertisers can show ads to consumers on Facebook that have visited certain Websites. Dominos, for example, can show pizza ads at lunch time to everyone on Facebook who has visited Dominos.com. It’s a handy way of telling if a consumer will be interested in buying something.
Putting ads for products in front of consumers who are interested in those products is how Google makes all its money.
Re-targeting is already getting good results on Facebook. Google has a similar product called the Google Exchange, where the inventory is third-party Google partners across the Internet. Everson told reporters that FBX is already showing a better return on investment for agencies.
Zach Coelius, CEO of Triggit, one of the ad-reselling companies Facebook has invited onto FBX, says that return on investment for advertisers buying through FBX is so good, that if all of Facebook’s ad inventory were sold with re-targeting, instead of user data targeting, Facebook would be able to charge 3X the price it charges for ads right now.
All of this sounds very exciting for Facebook and Facebook shareholders. Fact is, Facebook should have been selling ads this way for years, instead of confusing Madison Avenue with new ad units targeted with data no one else is using.
A note of caution, however: a source involved in the buying and selling on FBX tells us that it remains very small scale at this point, and will probably not have a material impact on the company’s third quarter earnings.