Facebook (News - Alert) has been criticized for not maximizing their potential in generating revenue through advertising. This flaw has resulted in Facebook’s stock dropping by 30 percent since the company’s IPO, according to Forbes. Recent headlines reveal that Facebook denies that there is anything wrong with their ad effectiveness, but this hasn’t appeased investors. It appears that Facebook might finally be moving in the right direction, simply by hopping on board with what Google (News - Alert) and other search providers have already found lucrative: browser readings through cookies. At the end of the day, there is a distinction between what people ‘like’ and what they buy.
The announcement regarding Facebook’s ad exchange debut, is not about innovation. It is a statement to Google and to other search engine providers that Facebook is ready to play their game. Just like with other companies, Facebook will distribute cookies in browsers that enable marketers to read and target audiences. Third parties, referred to as Demand-Side Platforms (DSP’s), will then provide ad bidders relevant data. Forbes discloses that the approved DSP’s include MediaMath, TellApart and AppNexus.
These ads will only appear in standard format (the format that Facebook argues works just fine, thank you). Facebook insists to existing users of Sponsored Stories and other more elaborate ad formats that they will still succeed in their own right.
The example that a Facebook spokesman gave about how their ad exchange works is, “a travel site may be interested in reaching a person who searched for a flight but did not complete the purchase. With Facebook Exchange, this travel website can show that person a related ad on Facebook.”
What this essentially means is that advertisers can now target people while they are on Facebook in the same way that they already do when people are on every other part of the Web. Because statistics indicate that the time users plug into the social network is substantial, this new ad strategy is destined to be a revenue winner.
Edited by Brooke Neuman