Facebook Inc. (FB) is doing a better job than Google Inc. (GOOG) in getting Web surfers to click on advertising based on browsing history, according to partners using the social network’s ad service that debuted in June.
Facebook Exchange, or FBX, generates as much as four times the return on ad dollars than other real-time bidding systems, said Triggit Inc., which makes software tools to help Facebook deliver the ads. Another partner, AdRoll, said advertisers used to getting $10 for every $1 they spend are making $16 for every dollar spent on FBX.
Attracting more advertisers is critical for Facebook, which has seen its stock drop 45 percent since selling shares to the public in May. That’s partly because of concerns over the world’s largest social network’s ability to generate sales from users who are increasingly active on smartphones and tablets.
“As more advertisers start to see the results we’ve been seeing, they will be willing to spend more money on Facebook,” Zach Coelius, chief executive officer of San Francisco-based Triggit, said in an interview.
Facebook introduced real-time bidding in June as it competes with Internet giants such as Google and Yahoo! Inc. (YHOO) for advertising dollars.
By tapping users’ browsing habits to deliver ads from its website, Facebook is betting that it can lure advertisers away from Google’s real-time bidding service. In real-time bidding, advertisers compete to deliver ads once a user’s browsing history matches a marketer’s profile. For example, users researching trips to Hawaii on travel websites may later see a promotion on Facebook for hotels on the islands.
An increasing portion of display advertising sales are driven by this real-time bidding. Of the $18.9 billion projected to be spent on online display ads in the U.S. in 2015, about $5.08 billion, or 27 percent, will come from real-time bidding, according to researcher IDC. This year, real-time bidding will represent about 16 percent of the $12.6 billion U.S. market for display ads, IDC said.
FBX could capture as much as a fifth of the market, and the business could generate as much as $1 billion in sales by next year, according to Brian Wieser, an analyst at Pivotal Research Group in New York.
The service may result in higher prices being paid for ads across Facebook, as more marketers see the value of real-time bidding, Coelius said.
“Right now, it’s 25 cents to 50 cents” for every thousand users who view an ad on the social network, Coelius said. “We expect that to go to anywhere from $1 to $2.50 in relatively short order.”
Facebook’s technology partners for FBX include TellApart Inc., Turn Inc., Triggit, DataXu Inc., MediaMath Inc., AppNexus Inc., Trade Desk Inc. and AdRoll. Advertisers showing messages through FBX include Shutterfly Inc. (SFLY), GoPro camera maker Woodman Labs Inc., and HootSuite Media Inc.
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