Just a month out of beta, MyCustomer.com examines Facebook's new advertising platform, Facebook Exchange, and asks is it really effective for marketers?

Is Facebook advertising actually effective? That’s the question everyone, including Facebook, is desperate to answer in the wake of the BBC VirtualBagel experiment and the social network’s bungled IPO. Recently, the brand has taken steps to reassure advertisers with its clamp down on fake ‘likes’, attempting to tighten the security on its brand pages and boost its ad targeting, but the social network has clearly realised nothing short than an overhaul is needed.  

Enter Facebook Exchange (FBX), the social network’s shiny new ad platform that promises marketers their own real-time consumer insight data to reach the network's audience, not to mention being an attractive money maker for its concerned shareholders. Debuting early last month after a period of beta testing, FBX is a new platform whereby advertisers can bid in real-time to buy display ads, called real-time bidding (RTB). These ads are then targeted to users based on their browsing history, enabling marketers to better target members with time-sensitive ads on the right hand side of their screen.

Additionally, in a move away from the previous system that only allowed marketers to buy ads from within Facebook, FBX now allows advertisers to buy ads from third party technology partners. Google and Microsoft have both established RTB advertising systems for their platforms, which will now see Facebook battle against competitors Google and Yahoo for advertising spend.

Microsoft has been active in the RTB space since launching the Microsoft Ad Exchange in June 2011. Peter Bell, CTO at Microsoft Advertising, explains: “We’re not alone in terms of our positive experience over the past 15 months, RTB can provide better cost efficiency, whilst allowing brands to target very specific audiences – a great way to ensure they are delivering advertising in the right place at the right time, which is proven to have a major impact on ROI”.

“However it is still early days and much of the buying has focused on lower (marketing) funnel conversions rather than managing consumer through the entire funnel. Together with the agencies, other publishers and our offline peers we need to collaborate and come to resolution on how we attribute value to fully realize the potential of RTB.” 

Early indications

A month on since its launch, advertisers and the tech media seem to have nothing but praise for FBX. Jonathan Beeston from Adobe, the only tech company to receive all four Preferred Marketing Developer awards from Facebook, believes the new ad platform is ‘great news for marketers’ and changing the way marketers are viewing display as a channel. He says: “The proportion of display ads bought through an exchange is increasing dramatically because it can significantly improve targeting and reduce wastage. As a result advertising budgets are flowing through exchanges, with marketers viewing it as an incredibly effective way of buying media.”

But has FBX had any actual impact on companies’ ROI so far? Early partner to the Exchange program, TellApart, is one such company that has, claiming to have seen a 10-20x ROI since serving ads via FBX for three months.

Rachel Bergman, global CEO at Alchemy Social, an Experian company, argues that there is no question that retargeting works. She says: “Results from FBX clients so far are pretty phenomenal, and are oftentimes higher than results seen from Retargeting on other networks.

“Custom Audiences campaigns are not only showing substantially higher results than typical Facebook ad campaigns (results are highly dependent on the campaigns being run), but they are also ensuring that companies are not wasting impressions by (as an example) trying to get existing customers to become customers, or by not showing customers offers that make sense based on their history with the brand.”

Pete Robins from independent digital media agency agenda21 adds: “Our early results look promising but that has partly been due to the cheap bid prices achievable given the low level of bidding competition. So I’m keen to see if the performance levels will continue at a larger scale over time – it should really become a major player in the exchange space.”

Todd Herrod from Kenshoo Social argues that the effectiveness of FBX is dependent on a number of factors such as campaign goals and objectives, quality of the ad copy and images. He says: “Our experience thus far suggests that FBX is a highly effective channel that drives significant incremental conversions from Facebook users.”

But Steve Hurn, CEO at Reevoo, argues that whilst the social web is the perfect platform for brands to interact with their customers, organisations must be capable of integrating a large amount of qualitative data into other systems such as their CRM system.

He says: “To get the best results, brands should ensure that the ads served on Facebook Exchange are properly targeted to the right audience, using data and insight gathered through other social and digital channels. For example, who are your core audiences for this product, and what are they likely to use Facebook for? Ensure your social ads fit in with their usage habits as well as their interests.”

User experience

Facebook’s new ad system may be beneficial with marketers but what effect will the changes have on user experience? Paul Dolan, MD at Xaxis, explains that following its introduction, users will see ads from a greater varieties of advertisers, as well as more ads from bigger name advertisers.

He says: “Additionally, the ads will tend to have more of a timeliness aspect to them. For example, a car company would be able to show ads to people who are actively looking for cars (and to only those people; other users not looking for cars would not be shown the ad). These changes reflect the fact that large, Fortune 1000 advertisers that are already heavy users of RTB technologies for their digital ad buys, will now be able to make these types of buys on Facebook as well.”

But in the rush to monetise its web-based platform, Facebook seems to have overlooked its mobile focus – strange, given that it’s been Zuckerberg’s focus in recent months. And how will it measure up to the Microsoft and Google’s well-established RTB platforms? It may still be early days for FBX but with so much appreciation, the new RTB system already seems to be a advertising hit.