The next move for Facebook’s ad empire: real-time bidding

With its stock value sinking, Facebook is looking to restore faith in its ad-based business model any way it can. It’s solution? A form of ad auctioning known as real-time bidding.

With the new system, dubbed “Facebook Exchange”, advertisers will be able to display more targeted ads using the browsing history of individual Facebook users, Bloomberg reports. While real-time bidding is new to Facebook, it’s already in use by companies like Google, Yahoo, and Aol.

“By bidding on a specific impression rather than a larger group, advertisers are able to show people more relevant ads while also running more efficient and effective campaigns,” Facebook said in a statement.

Real-time bidding is a different sort of beast from the pre-paid ad model most people are familiar with. The bidding component is simple: Advertisers vie for a particular ad spot, and whoever offers the most cash wins the prize.

This is all done in real-time, which means that not only is the system swift and flexible, but it’s also potentially more powerful as well. Rather than serve ads with a wide net, advertisers offer them based on actual user behavior — offering Jameson ads to those who really like Mad Men, for instance. The effectiveness can be increased even further if advertisers run the Jameson ads while Mad Men is on television.

For Facebook this obviously means greater revenue in situations where multiple ad firms are trying to outbid each other for some particularly juicy piece of real estate. And greater revenue is just what Facebook is looking for now that it’s under the watchful eyes of investors.

The problem? With better targeting comes more strenuous tracking, and Facebook Exchange will offer both in droves. Will this make Facebook users uneasy? Probably. While the social network doesn’t plan to offer the ability to opt out on Facebook proper, users will be able to do so via third-party brokers.

Photo: People raise hand to be picked/ Shutterstock