In late June, Facebook confirmed the pending launch of Facebook Exchange, its new real-time ad exchange service that will for the first time allow marketers to target audiences on Facebook using both first-party and third-party data¹ This is a big deal for two reasons. First, if it works as intended, Facebook Exchange represents a boon for advertisers and marketers, who will be able to offer Facebook users real-time ads that are partially based on users' off-site browsing behavior. Second, if it works as intended, it represents yet another incremental step in the infringement of user data privacy.
To date, advertisers haven't been able to access Facebook users with any type of first-party to third-party cross-platform media buy. Facebook's Exchange platform is set to change all that, giving them the opportunity to offer more relevant ads by baking past intent into the user experience. It also gives Facebook an opportunity to cash in on the lucrative direct response advertising market, where companies such as Google have made so much money.¹
What do I mean by the term "past intent"? Let's say you were thinking about taking a trip to Bora Bora a few months back. Perhaps you stayed up late one evening visiting numerous online travel sites browsing rates and trip packages.
Fast forward to the present. As you enjoy your morning ritual of coffee and Facebook, up pops an ad offering a killer all-inclusive trip package to Bora Bora. Coincidence? Not with Facebook Exchange in place.
How did this magic happen, you may be wondering?
It's all about the cookies.
IT'S THE COOKIES, STUPID
A cookie, (aka a web or browser cookie) is essentially a small bit of data that is sent from a website and stored in a user's web browser while he or she is browsing said website. When that user browses the same website in the future, data stored in the "cookie" can be retrieved by the website to inform it of the user's previous activity.²
Cookies in and of themselves are not necessarily bad; in fact, they oftentimes make our web browsing experiences more efficient and customized. The problem is that many companies use third-party tracking cookies to compile lengthy records of individuals' browsing histories, invoking numerous privacy concerns.
Enter companies like AdRoll, who help brands sync the cookies they've previously dropped into users' browsers with a Facebook cookie. The San Francisco-based ad retargeting firm is one of eight DSPs (demand side platforms) that Facebook has tapped to manage its ad exchange inventory.¹ In a recent Ad Age Digital post, AdRoll President Adam Berke noted that the integration with Facebook will operate much like its re-targeting of first-party traffic on Google, Microsoft, or Yahoo's display networks currently works, pointing out that re-targeted ads often have higher CTRs.
This kind of big data+real-time ad bidding will likely prove to be a home run for advertisers and marketers.
But what about user privacy?
Something tells me this is not the last data privacy battle in Facebook's future.
BALANCING EFFICIENCY WITH PRIVACY
Which side you land on the ad-targeting-meets-Internet-privacy debate may largely depend on whether you're a glass-half empty skeptic, or a glass-half full optimist.
Unfortunately, on any given day, I tend to waiver somewhere between both extremes.
On the one-hand, it is kind of creepy to think that Facebook is combining my on-site user data with data from my off-site browsing activity to tell me what I want to buy. On the other hand, aren't the friendly bots at Facebook et. al. providing a useful service by reminding me what I wanted to buy all along?
It will be interesting to see how Facebook Exchange fares in the coming months. I have a feeling that it will end up doing well, if only because at the end of the day, as much as we all want to consider ourselves dreamy-eyed idealists willing to go to great lengths to defend our basic constitutional right to privacy, the majority of us are lazy.
For most, practicality usually trumps principle.
Besides, if Facebook is able to make money by reminding me of that new set of golf clubs I really want to buy anyway, I say, good for them. Over time, Facebook Exchange may even prove to be an alibi of sorts for all of us unwitting spendthrifts.
"Don't blame me, honey. Facebook made me do it."
¹ Ad Age Digital, "Facebook to Launch Real-Time Bidding for 'Marketplace' Ads"
² Wikipedia, "HTTP Cookies"