Facebook takes control of cookies to create more targeted ads

A new feature to be introduced by Facebook, called Facebook Exchange, will further delve into the interests of its members and create better targeted opportunities for advertising your business.

According to Mashable, Facebook ads had previously been based solely on users' interests displayed on the site. But with Facebook Exchange, the social network will place cookies on third-party sites so it can view users' browser history and offer targeted ads based off site visits.

For instance, Bloomberg uses the example of a user who has been researching trips to Hawaii - Facebook may now run ads for hotels in Hawaii on that user's page.

The move comes in the wake of Facebook's stumble into the stock market, as it has dropped 28 percent since its debut last month. Many investors view part of the issue as Facebook's difficulty with advertising.

"Facebook's been having challenges coming up with effective advertising," said Debra Aho Williamson, an analyst at New York-based EMarketer Inc., as quoted by the news source. The company "is hoping to use that inventory on the right side of the page to deliver advertising that is more targeted."

Mashable explains that Facebook will be more likely to place cookies on sites users have shown an intent to buy from. The more a user is on a certain third-party site, the more likely he or she will see ads on Facebook with those interests in mind.

The benefits for advertisers are obvious - they'll get a better idea of whether the ads they show are actually for products that users intend to purchase. Companies can then go through the bidding process to place ads on a user's profile, with prices based on the cost-per-thousand viewers, Hubspot reports.

Facebook hopes to gain significant revenue from this addition - the news source cites IDC data which predicts that real-time bidding on U.S. online display ads will account for 27 percent of the projected $18.9 billion ad budget by 2015.

Exchange will likely roll out within the next few weeks, and it will be extremely difficult to opt out of, since there's no way to decline permission on Facebook itself. Instead, users would need to go through the sometimes exhaustive process of disabling third-party cookies.