Facebook Calms Investors with Ad Bidding Announcement
Facebook (NASDAQ: FB), the social media giant, revealed Thursday that it is planning to introduce real-time bidding for advertising on the website.
The new service is called Facebook Exchange. Company spokeswoman Annie Ta said that it will give advertisers the ability to target specific groups of users with strategic ads based on the user's browsing habits. For example, if a user regularly frequents movie review websites, they might find themselves receiving ads for DVD retailers and movie streaming sites.
Ta said that ad prices will be based on a determined cost per thousand views, and spots will be sold through third party technology partners.
Facebook may hope that investors view the news in a positive light, and that they will understand the potential for huge revenue growth. The company has seemingly lacked investor confidence, as the stock has fallen 28% since it arrived on the market in May.
Some investors have been concerned that ad revenue growth is not keeping pace with Facebook's membership growth. The introduction of ad bidding may help alleviate that concern.
Facebook is not the only one to use this technology. Current projections see real-time bidding accounting for roughly $5.08 billion, or 27%, of an estimated $18.9 billion to be spent on display ads on the web in the U.S. in 2015.
Compare that to 2011, when real-time bids accounted for $1.07 billion, or 9.8%, of display ad sales in the U.S., and it is apparent that the growth is significant.
Facebook will be partnering with TellApart, Turn, Triggit, DataXu, MediaMath, AppNexus, the Trade Desk and AdRoll.com on the project.
Still, some consider the technology controversial. As it targets ads directly at individual consumers, there are potential privacy-related concerns.
Early on Thursday, Facebook traded up roughly 2% near $27.60.
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