The Facebook Advertising Ecosystem Explained

Facebook is a daily destinations for millions and millions of consumers. Increasingly, their ad products offer targeting according to specific demographics, social connections, interests, and habits.

Advertising on Facebook has become more sophisticated, varied, and data-intensive. Facebook has rolled out a spate of new ad formats in the past year and now offers at least seven major ways to advertise.

In a new report from BI Intelligence, we analyze the state of social media advertising and where it is heading, offering a comprehensive guide and examination of the advertising ecosystems on Facebook and Twitter, analyzing each of their principal ad products and concepts behind them, offer a primer on Tumblr as an emerging ad medium, and detail how mobile is an important part of this story as mobile-friendly as native ad formats fuel growth in the market.

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Here's an overview of the Facebook advertising ecosystem:

• Facebook has rolled out many different ad products over the last year: Facebook now offers at least seven major ways to advertise, including brand pages, display ads, sponsored stories (which are being phased out), promoted posts, page post ads, mobile app install ads, and log-out screen ads. Each of these ad products has their own benefits, but there are a handful of additional products and concepts that are key to understanding Facebook's advertising ecosystem, including...
• Custom Audiences: Marketers can use the offline customer data they already have to find past or existing customers on Facebook. Then they can target these consumers on Facebook with ads. An extension to Custom Audiences, Lookalike Audiences, uses the same data to help companies find prospective customers on Facebook.
• Partner Categories: This is another tool that helps marketers leverage offline data. Let's say you are a mom-and-pop shop and don't have your own data to use Custom Audiences and make a highly-targeted ad buy. Facebook offers the third-party data of a few vendors to help you find your target audience on Facebook.
• CPA: This acronym means Cost-Per-Action, which is a new pricing method Facebook introduced last month. Instead of paying in the standard ways for per-click, or an impression basis, advertisers can pay for a certain number of Likes, Link Clicks (these are clicks on a specific link, not the whole ad), or Offer Claims. Along with Custom Audiences and Partner Categories, CPA is meant to help attract performance-oriented marketers to Facebook — as opposed to brand marketers, who often simply go for reach.
• FBX: Facebook is moving steadily into the world of data-enriched, real-time digital ad sales. Facebook Exchange or FBX is an ad exchange that allows advertisers to serve ads to users on Facebook based on past actions they have taken online, like shop for an airline ticket.

In full, the report includes:

• The State Of Social Media Advertising And Where It's Headed
• A Guide To The Facebook Advertising Ecosystem
• A Guide To The Twitter Advertising Ecosystem
• A Primer On Tumblr's New Ad Products

To access BI Intelligence's full reports on The State Of Social Media Advertising, sign up for a free trial subscription here.