Facebook is about to launch a new advertising program called Facebook Exchange, which could not only be a massively profitable venture for the company, but according to them, could improve the relevancy of the ads that you and I see on a daily basis.
The premise of Facebook Exchange is pretty simple: When you visit a site (other than Facebook) and spend some time looking at a product, but don't make the final purchase - that third-party site will be able to follow you to Facebook and target you there with a highly specialized ad.
For example, let's say that I spent a good while checking out a new watch on a third-party retailer's site (that has enlisted a demand-side platform) - let's go with Swatch. Although I didn't actually end up buying the watch, I was on the site long enough for them to determine that I was very interested in it - so they hit me with a cookie.
If the advertiser (in this case Swatch) wanted to pursue me beyond the walls of its site, the demand-side platform would contact Facebook and use an anonymous User ID to show intent to target me. Now, the next time I log in the Facebook, that cookie alerts everyone to my presence and the advertiser is allowed to make a real-time bid to show a pre-rendered ad to me.
And if everything goes according to plan, I'll see a perfectly targeted ad for that blue Swatch watch I was eyeing earlier that day - or even earlier that week.
There are currently 8 DSPs involved in the testing of Facebook Exchange: TellApart, Triggit, Turn, DataXu, MediaMath, AppNexus, TheTradeDesk, and AdRoll.
Of course, the first question on everyone's mind is "how can I opt-out?" According to Josh Constine at TechCrunch, users will not be able to opt-out of the program completely from inside Facebook. But they can opt out of future Facebook Exchange ads from individual DSPs. Apparently, if a user Xs out of one of the targeted ads, they'll be given a link where they can opt out of future ads.
And as far as privacy goes, Facebook says that they won't give up your data - all of that juicy social graph stuff (biographical, social, etc) in combination with the cookie-based targeted ads. However, I have a feeling that many users still won't be too thrilled with this level of tracking across multiple sites (although it's not uncommon at all across the web).
But, there's no denying that this is a possible lucrative hit for Facebook, a company who has seen its stock price plummet since its IPO and who has had to stave off concerns about their monetization strategies. This is a pretty bold advertising strategy, and could excite advertisers due to its highly specific and real-time approach. "Give 'em exactly what they want, exactly when they want it."
Facebook Exchange will launch in a more widespread format in the next few weeks, according to the report.