A Monumental Shift in Banner and Display Ads on Facebook

Let’s face it: most people don’t click on banner or display ads. The fear of annoying popups blocking the content on Facebook that you’d actually like to see is the main deterrent. Usually, these ads have no relevance to the person seeing them. Personally, I do not partake in laser hair removal and never will, so the ad for a free consultation that I see every few days appearing on the right side of my screen is no use for me, and I will probably never click on it. It’s no wonder why Inc. Magazine reported meager Internet-wide click through rates averaging from 0.1% to 0.4% at the beginning of this year. These dismal numbers have prompted marketers to ask themselves if this digital medium is worth the investment. While scores of companies have jumped ship and invested in other ad mediums, those who have taken the leap of faith might be in for a pleasant surprise.

Facebook announced in June that it would begin testing a new advertising tool called Facebook Exchange, allowing brands to show personalized ads based on consumer web browsing habits—similar to Amazon.com’s “recommendations”. This is how the process works: If I log onto Facebook, open a new tab and run a Google search for “Ford Explorer”, I would be able to see a banner or display ad for a Ford Explorer or other Ford SUVs on my Facebook page (assuming Ford has paid more than its competitors to show its ads).

So, what have been the results so far? The ad agencies partnering with Facebook say there are varying degrees of success. One such agency, Triggit, has seen a 4 times return on advertising costs, while AdRoll has reported an average of 16 times return on investment. More testing needs to be done to produce meaningful click through rates, but the CEO Bill Demas of Turn, another partner agency, already sees that due to Facebook Exchange, “advertisers have achieved their overall campaign goals very quickly (underscoring)…its potential as an important part of the media mix.”

Many questions still linger about user security, whether costs will increase as more brands become aware of Exchange, and if the results from utilizing Exchange are significant. With Facebook having over one seventh of the world’s population under its belt and being responsible for over 28% of ad impressions in the United States last year alone, brands will probably consider participating in Exchange. It may allow their banner and display ads to become a lot more interesting and relevant to Facebook users.

-Shaman Kothari

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