Peter Kafka

Recent Posts by Peter Kafka

Facebook Throws a Coming-Out Party for Its Ad Exchange

Mark Zuckerberg says Facebook is going to make a lot of money from mobile ads. In the meantime, the company is trying to figure out how to make more money from the Web ads it already sells.

Here’s one way: Take the small “marketplace” ads the company runs on the margins of its pages and make them more valuable, by letting marketers use their own targeting data to pitch the social networks’ users.

That’s the premise behind the “Facebook Exchange” the company launched three months ago.

Since then, Facebook executives have placed a cone of silence around the project. Now it’s letting some of the ad tech companies that have been piloting Facebook Exchange talk about their experiences.

Not surprisingly, Facebook’s ad partners have lots of positive stuff to say about advertising on Facebook. Alas, no one is releasing comprehensive data about Facebook Exchange’s performance so far.

Instead we have selected data points about selected campaigns, released by companies with more than a rooting interest. Some of the press releases I’ve seen are even less useful than that — they simply announce that company X is working with Facebook, and is excited about that fact.

So you’ll understand why I’m not going to recap each one for you.

Instead, here’s the most useful, apples-to-apples data set I’ve seen, from retargeting start-up TellApart:

  • The average “user click-through rate” for the ads it has run on Facebook exchange has been 6.65 percent — slightly better than the 6.41 percent it gets on Google’s rival AdX.
  • Its customer has had the most success with Facebook Exchange, generating click-through rates of 15.6 percent, compared to 12.7 percent at Google.
  • Customers who do click on the Facebook ads end up spending $159 per average order, compared to $163 for Google.

I’m quite sure that not every online ad buyer that has used Facebook Exchange is ecstatic about the results, because I’ve talked to some who weren’t that impressed. One gripe I heard: The marketplace ads themselves — the small boxes you normally see on the right-hand side of your Facebook home page — simply aren’t big enough to display an effective marketing message, no matter how targeted they are.

But for argument’s sake, let’s say that Facebook’s ad targeting program does work as advertised. If so, J.P. Morgan analyst Doug Anmuth figures that for every percentage point of marketplace impressions Facebook sells through Facebook Exchange, its U.S. ad revenue could jump 2 percent to 3 percent.

That’s not the same as solving the mobile riddle for Zuckerberg and company. But it would be a very nice boost.


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work