Facebook Inc, the world's biggest social networking site, has teamed up
with a Chinese partner on real-time bidding (RTB) for advertising on its site,
a technology used by Google Inc and other Internet companies to target
advertisements to consumers more effectively.
The move will enable the US-based
company to reach more Chinese advertisers who want to place more targeted
advertisements on Facebook even though its service is not accessible in China
currently.
Facebook is cooperating with
Beijing PinYou Interactive Information Technology Co (iPinYou), a Chinese
advertisement broker that places advertisers' bids on RTB platforms. It is
matching the system of its RTB service, Facebook Exchange, with iPinYou's, said
Huang Xiaonan, chief executive officer of the Beijing-based company.
Facebook Exchange enables
advertisers to reach specific types of consumers based on their browsing
history with the usage cookies on consumers' computers. For example, an
Internet user who visited Web pages related to trips to Paris may see advertisements
of Paris' hotels and flights later on Facebook.
"There is demand from
Chinese advertisers to reach out to US consumers and this is the way how
Facebook can cash in on the Chinese market," said Huang. The chief
technology officer of iPinYou had in October along with a team of Chinese
advertisers held talks with Facebook officials on possible avenues for
cooperation.
An e-mail sent to Facebook for
more information went unanswered.
There are a large number of
Chinese exporters that want to reach international customers, and most of them
now use Google to place advertisements, said Hong Bo, a Beijing-based IT
analyst and founder of consultancy firm IT5G.
"The most widely-used way
for these exporters is to buy keywords on Google because keyword searching is
the most directly linked measure of consumers' willingness to buy," he
said, adding that Facebook is exploring ways to improve the effectiveness of
social advertisements.
Facebook launched its RTB service
in the US and Europe in September, a move to make it easier for users to focus
on advertisements relevant to them, compared with traditional display
advertisements.
Google, which remains the largest
player in the online advertising sector in the United States, has a similar
service called DoubleClick Ad Exchange. Amazon.com Inc, US biggest online
retailer, has also launched its own RTB services, says a report in Adweek
earlier this month.
Huang says that the revenue
earned by Facebook from traditional display advertisements, measured by cost
per thousand price, is 5 to 10 times less than vertical websites. She adds that
it is also the reason why the US-based social networking company launched
Facebook Exchange to improve the relevance of its advertising.
An increasingly large proportion
of display advertisement sales will be generated by the RTB technology. RTB
will account for 27 per cent, or about US$5.08 billion, of the US$18.9 billion
marketers are expected to spend on online display advertisement in 2015 in the
United States, according to market research company IDC.
RTB generated sales of US$1.07
billion last year, accounting for 9.8 per cent of total display sales in the
US.
Figures on RTB sales in China are
not available, as the technology is still not widely used in the country.
"Those who want to try RTB
advertising first on Facebook are exporters and travel companies," said
Huang, adding that some of the company's corporate customers have shown
willingness to try out Facebook.
Facebook, which had 1 billion
monthly active users by September 30, earned US$3.15 billion from advertising
last year. However, its share prices have tumbled as investors' think it is not
generating enough revenues despite the huge user numbers.
Carlos Kirjner, an analyst with
Bernstein Research, estimated that Facebook Exchange is on course to generate
annual revenues of US$1 billion. He also estimates that the service could take
up to one third to half of the whole market for advertising generated by RTB.
Facebook Chief Operating Officer
Sheryl Sandberg earlier told investors that she believed the global RTB market
was somewhere in the vicinity of US$2 billion.
In June, Facebook and US
researcher ComScore Inc said in a joint report that advertisements on social
networking sites encourage users to buy products from brick-and-mortar stores
as well as online platforms.
However, in a separate poll by
Reuters and Ipsos, results showed that just one in five people on Facebook have
bought products because of the advertising or comments they saw on the website.
Other than Facebook, iPinYou has
already connected with the RTB platforms of Alibaba Group Holding Ltd, Tencent
Holdings Ltd, and 14 Chinese online video companies, Huang said. She added that
with the technology, the cost for an online video provider to get a new
customer was just half of the traditional way.
IPinYou has about 100 customers,
most of whom are in industries like e-commerce, finance, travel, car, and fast
moving consuming goods.
Chen Limin
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