But the social network’s advertising revenue grew 18.4% during the quarter.
OnlineShoes.com’s Facebook Exchange ads produce a user click-through rate of more than 15%.
Facebook Inc. today announced that Facebook Exchange, its real-time bidding system that allows advertisers to better target Facebook users, is open for business. Facebook announced the new bidding system in June and several ad brokers that have tested it since say the new ad system can be extremely effective.
Facebook Exchange enables ad brokers, using cookies on consumers’ computers, to target consumers ads based on their off-Facebook browsing. The display ads, which Facebook calls marketplace ads, appear on the right side of Facebook.com pages. For instance, a shopper who visited an apparel retailer but did not make a purchase might be retargeted with an ad presenting her with an image of the dress she looked at, along with a coupon for that retailer.
“Facebook Exchange is perfect when the objective is a conversion outside Facebook and the data used to drive that objective exists outside Facebook,” wrote Scott Shapiro, a product marketing manager at Facebook, in a blog post. These ads do not appear on the smaller screens of mobile devices.
Triggit Inc., which places advertiser bids on Facebook Exchange, Google AdX Exchange and other online real-time advertising platforms, says results from two clients showed that consumers retargeted via Facebook Exchange converted at 2.2 times the rate of shoppers presented ads on competing online ad systems. Moreover, the cost per click for the Facebook ads was roughly 15% those on other ad platforms.
Another retargeting company, TellApart Inc., says OnlineShoes.com’s Facebook Exchange ads produced a user click-through rate of more than 15%. A user click-through rate represents the percentage of consumers who click-through after being presented with a particular ad. For the sake of comparison the vendor’s average user click-through rate on both the Facebook Exchange and Doubleclick Ad Exchange is 6.6%.
Such reports suggest that, for now, ads purchased via Facebook Exchange are a bargain, says Zach Coelius, Triggit’s CEO. “We look at this like the early days of paid search,” he says. “In those early days you could buy a keyword like ‘mortgage’ for very little and it would produce big results. The early folks who jumped aboard paid search built big businesses on that dichotomy. We think businesses might be able to do the same thing here.”
However, businesses can’t simply replicate their approach on other ad platforms, he says, because consumers behave differently on Facebook. “People are on Facebook all day,” he says. “They’re engaged on it all day.” That’s different from other platforms where shoppers generally focus their browsing at night, which, in turn, enables marketers to focus their keyword bids at night, he says.
Marketers have to pay heed to those differences, he says. For instance, his client data show that consumers are twice as likely to convert within two days of being retargeted on Facebook than shoppers retargeted on other ad exchanges.
Facebook will likely gain traction with Facebook Exchange because advertisers already understand real-time ad bidding, says Rebecca Lieb, digital advertising analyst at research and advisory firm Altimeter Group. “This is what ad buyers do every day and now they can do it on Facebook,” she says. “This type of targeting should make Facebook’s ads more relevant.” And it could also help Facebook exchange with similar online advertising platforms, like those offered by Google and Yahoo.