What is Facebook Exchange?

Definition: Facebook Exchange, also known as FBX, is Facebook's proprietary platform advertising service for desktop users. FBX is driven by real-time bid purchases, and allows online advertisers to place ads onto the Facebook sidebar or directly onto users' timeline as they scroll down.

Facebook Exchange is currently aimed at desktop users, with relatively little integration in the official Facebook mobile apps.

How Facebook Exchange Differs From Other Ad Bidding Systems

Facebook Exchange leverages the social media giant's massive (and growing) user base with prime advertising real estate for online businesses.

• Audience: With over one billion users worldwide, and still growing, it's one of the most popular services on the Internet.

• Data: Facebook owns one of the most comprehensive troves of user data in human history: the wealth of information Facebook has on its users is probably the largest comparable database in the industry. Competing systems — such as Google AdWords — are largely restricted to using "incidental" data gathered from users and their devices at the time of request, such as the local time and location. FBX, on the other hand, has access to every action each Facebook user has ever taken within the system, including extremely specific likes, preferences, and brand opinions. When leveraged by online marketers, this allows precise micro-targeting.

• Retargeting: FBX utilizes tracking cookies to remember what products a customer has expressed interest in previously. For example, if a user has searched for Nike shoes at Amazon, their computer could be carrying a cookie which signals to Facebook that it should display Nike ads to that particular user.This further adds to the high level of customization and targeting online advertisers can achieve via Facebook Exchange.

How FBX Differs From Traditional Facebook Advertising

1. Restricted to large buyers

FBX is not open to the general public, but is only available to large Demand-Side-Providers of advertising services. Generally, a company has to be partnered with a major online ad agency to get FBX access.

2. Focused on retargeting

As mentioned above, FBX relies heavily on retargeting for placing ads, whereas traditional Facebook ads are targeted solely based on demographic and activity-related data.

3. Additional data sources

FBX allows companies to integrate their own external data sources into ad targeting, beyond Facebook's own data.

4. Emphasis on conversions

Traditional Facebook ads are generally intended to build brand awareness and spark conversations. FBX ads are almost always aimed at driving viewers to websites and creating lead/sales conversions.