Understanding Facebook's FBX - Social Media's First Ad Exchange

Facebook launched FBX - the first-ever social media real-time bidding (RTB) ad exchange - in June 2012 to let advertisers buy Facebook ad inventory that retargets users based on their past online browsing history. Since then, FBX has come to account for a huge slice of retargeted clicks on the Web.

But there has been a fair amount of confusion over how FBX works, how it differs from other Facebook ads, and why advertisers would choose FBX inventory.

In a new report from BI Intelligence, we explore how advertisers purchase ads through FBX and why the Exchange offers such a unique opportunity to marketers. The report also puts FBX in context in terms of its size and performance so far.

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Here are some of the key details surrounding FBX:

• FBX is becoming a huge player in the real-time bidding space: Millions of ads are sold and purchased on FBX every second with the help of demand-side platforms that plug advertisers into FBX, and billions of impressions are served every day. Facebook already accounts for about half of the retargeted ad clicks on the Web.
• The real-time aspect of FBX is crucial. It's impossible to target a user who is interested in living room furniture with personalized ads when they open their Facebook page unless he or she can be identified and served a relevant ad in milliseconds.
• FBX fills a certain niche, a very specific marketing objective known as "demand fulfillment," nudging shoppers to complete a purchase they've already shown interest in.
• The platform was fast out of the gate: FBX produced stellar early results for advertisers, both in terms of cost and performance. Eventually, the price and performance bar will be set higher. That's already starting to happen for better-performing News Feed placements.
• Despite FBX's huge weight in the retargeting space, it still constitutes a small share of overall Facebook revenues. FBX is not yet available on mobile, though this may be coming soon. Additionally, Sponsored Story social-native ads, which are at the heart of Facebook's ad ecosystem, aren't accessible via FBX. The FBX News Feed ads are still limited in terms of their social features.

In full, the report:

• Details how FBX works, including which DSPs are involved, and how the DSP works with Facebook to serve ads
• Outlines which ad inventory is available on FBX and which is not
• Sizes FBX in terms of the total retargeting market, and its relative weight in Facebook's paid media ecosystem
• Explains which advertisers are best suited to FBX campaigns
• Provides three case studies from DSP partners on FBX performance so far