Since Facebook’s record breaking IPO last month, they have seen the stock tumble by almost a third and fluctuate massively on a daily basis. Some will see this simply as growing pains for the business as mystery still surrounds the true value of Facebook based on potential advertising revenues.
The confidence in Facebook advertising has been dwindling in recent weeks, with the discovery by a Reuters/Ipsos poll that only a minority of users are influenced by Facebook ads while only 20% have bought products on the back of a particular advertisement on the site. This by no means makes Facebook a dead duck, as over $3 Billion was generated from advertising last year and with the site fast approaching 1 Billion users there is still a huge potential for growth.
Facebook have this week looked to reinforce their advertising offering with the announcement of Facebook exchange, an advertising system based on showing display ads relevant to a user’s recent browsing history. This is of course strikingly similar to Google’s remarketing tools that are employed effectively by a number of advertisers as a second bite at the cherry.
The system works by relying on users logging into Facebook and navigating away from the site while still signed in which allows them to be monitored with Facebook’s cookie tracking. Moving on from this the users search activities on any DSP site for a particular product or service will be relayed back to the Facebook exchange for use in ads. This information allows Facebook to deliver tailored ads based on recent interests, which in theory makes the service more relevant and time sensitive for the end user.
For the user that is receiving these ads, they have the opportunity to opt out of ads from a particular advertiser but not the Facebook exchange as a whole.
A number of users are sure to find this manner of advertising invasive. However if Facebook can manage the level to which they deliver these ads, they can reduce the backlash of perceived stalking from advertisers and ensure the system works at the right level.
Whether this will increase conversion rates is yet to be seen, but when Google launched their remarketing campaigns fuelled by the Double Click Exchange they reported significant increases in banner conversion rates using remarketing. Facebook will take solace from this and will hope for similar results.
Expect this system to be rolled out in the coming weeks with a formal announcement.