Facebook is launching a new tool, "website and mobile app custom audiences", that enables advertisers to run retargeting campaigns directly through a native Facebook interface, as opposed to having to go through demand-side platforms (DSPs) that connect to Facebook Ad Exchange (FBX).
Retargeting is a form of online advertising where a retailer uses cookies to mark visitors to a website. Using these cookies, the retailer anonymously follows its website visitors across the web, targeting them for ads as they continue their web browsing. An example of retargeting would be if you visited the Tiffany & Co website, then checked Facebook and saw an ad on the right hand side advertising Tiffany's jewelry.
If retargeting is already possible on Facebook, why would the social network introduce this new "custom audiences" tool? The answer: ad revenue. Right now, DSPs are taking a significant cut of the revenue paid by retailers to advertise on Facebook. Meanwhile, Chief Operating Officer Sheryl Sandberg stated during the company's 2Q earnings call that FBX accounted for "a very small part" of Facebook's revenue. "Custom Audiences" gives Facebook the opportunity to circumvent its DSP partners and keep more revenue for itself.
To incentivize advertisers to use "Custom Audiences", Facebook is offering: 1) mobile inventory and 2) the ability to overlay standard Facebook targeting options (e.g., gender, geography, age). Both of these options are not currently available within FBX through DSPs.
On the other hand, FBX would still trump this new option in the element of "predictive buying", where a user who is looking at diamond necklaces might be shown an ad for purple shoes because algorithms predict a correlation between the two behaviors.
Facebook product marketing manager Scott Shapiro says he foresees advertisers using both FBX and "Custom Audiences" due to the relative strengths of both options.
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