Facebook is doubling down on its real-time bidding exchange and bringing third-party ads into users' news feeds for the first time. With news feeds being the dominant activity on mobile, the move also presumably gets the company one step closer to delivering more ads on its mobile platforms.
The expansion into users' news feeds, the most prized space in all of Facebook, indicates the company is enthusiastic about the early results of Facebook Exchange less than a year after it launched with ads appearing on the right-hand side of the site. As of last month, FBX had accumulated one billion impressions served according to Adobe.
As the exchange and data-driven ad offerings grew rapidly in the first few months, Facebook was eventually compelled to address privacy concerns after its partnership with data matching firm DataLogix was revealed in the fall. But now that users will see ads targeted to them based on the sites they visit outside of Facebook more upfront and personal in their news feed, fresh criticism will undoubtedly emerge.
"I think that consumers might think that this is slightly stalky. There could be pushback, not because this is something new, but because it's in a more personal space," says Rebecca Lieb, an analyst at Altimeter Group. "We've all had the experience of looking at a new computer or a new pair of shoes and that product follows us around the web for a while. So that's not highly unusual, but following us around the web and following us in our news feed…it's closer to your personal space."
Although Facebook claims the introduction of retargeted ads in users' news feeds won't impact the total number of ads users see in that space, overall perceptions among users will differ because the ads will reflect something they've done online presumably recently, adds Lieb.
"The news feed is their golden goose, so they need to be careful in how they tamper with it," says Doug Schumacher, co-founder of Zuum. But neither he nor Lieb is surprised by Facebook's latest move in the social advertising space.
"Retargeting is effective, otherwise advertisers wouldn't do it," Lieb says.
"Facebook has an enormous amount of data and it can layer that data on top of retargeting data, possibly making it even more valuable," she adds. "What I think Facebook is doing here, and this is a product primarily aimed at direct marketing or direct marketing initiatives and goals, is trying to garner higher click-through, higher traffic, and hopefully higher conversion on retargeted ads."
"In addition to revenues, there's enormous amounts of data to be gathered by going off Facebook," Schumacher adds. "Further linking users' Facebook activity to areas outside of Facebook could bring them a lot of behavioral insights as they move into e-commerce...While Facebook is something of a walled garden, it also makes sense they'd try to bridge the gap with the outside world."
Lieb also pointed to a problem that limits the efficacy and reception of many retargeted ads today, and one that could compound in news feeds because Facebook does not plan to offer FBX ads on a frequency- or time-capped basis, according to Lieb. "We've all had the experience where something that we bought six months ago is still being advertised on sites we visit across the web. I think this has been a problem for retargeting in general," she says. "On Facebook, this fly in the ointment could be magnified by virtue of the fact that these ads are going to appear in a space that's much more personal and immediate to users than say a third-party publisher site."
Facebook is working with demand-side platforms TellApart, MediaMath, and Nanigans as it starts to bring more outside ads to news feeds early on, but it plans to make the new format more broadly available to DSPs and advertisers over the coming weeks.
"This is an alpha. Not a beta, not a test," says Lieb. "So it's going to be incumbent on advertisers to test and run the analytics on their results and see if this is more effective than the former positioning."
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Matt Kapko has been writing about mobile since 2006, before it became cool. Based in Long Beach, CA, he has covered mobile entertainment, digital media, marketing, and advertising for several business media outlets. A former editor and reporter for RCR Wireless News, paidContent, and iMedia Connection, Matt is a regular freelance reporter for ClickZ. You can follow Matt on Twitter at @MattKapko or drop him a line at email@example.com.
March 19, 2014