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Facebook Dramatically Improves Its Ad Business

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As Facebook (NASDAQ: FB  ) ads evolve, the company continues to improve both its ad-targeting capabilities and its ad quality. This has been especially true in the last few months. Two changes in particular should pay off handsomely for Facebook.

More like Google
Until April, Facebook could only provide ad-targeting based on users' expressed interests on Facebook. This gave Google, who has loads of data on users' web-browsing habits, a significant upper hand. Their value proposition to prospective ad clients was distinctly more appealing than Facebook's. Yet with Facebook's April launch of partner categories, the company can now provide increasingly sophisticated ad targeting.

Source: Facebook Studio blog.

Partnering with third-party data sources Acxiom, Datalogix, and Epsilon, Facebook can now provide targeting based on browsing habits from their site and from purchases made across both mobile and desktop platforms. Even better, the company can do this without direct access to users' personal information, since the data is gathered through third parties.

Trimming the fat
Facebook currently plans to simplify its product offering for marketers. After collecting market data over the past year, the company realized that many of its products overlapped. It was time to trim the fat.

Over the next six months, Facebook plans to eliminate more than half of its 27 ad units. How? By getting rid of redundancies and combining the best of multiple ads into single ads.

For instance, Facebook tested new page post link ads, which use actual posts from a business or brand's page to send users directly to an advertiser's own webpage. These were more effective than the previously used Facebook Offers in generating awareness about product deals and sending users to advertisers' sites. The solution? Eliminate Offers.

Source: Facebook Newsroom.

And here's another example. Page post photo ads are a boon for advertisers, but research from Nielsen, comScore, and Datalogix prove social context to be a major driver in both return on ad spend and awareness. So why not give advertisers the best of both worlds?

Source: Facebook Newsroom.

Drawing on experience and its feedback from marketers, this consolidation of ad units will undoubtedly drive better results for Facebook advertisers.

Reinforcing Facebook's moat
These changes shouldn't be underestimated. Anything that makes ads more effective is a win-win-win for Facebook, marketers, and members. More effective ads mean better click-through rates and higher return on investment for marketers, more relevant ads for members, and a stronger value proposition to drive sales for Facebook.

After the world's most hyped IPO turned out to be a dud, many investors don't even want to think about shares of Facebook. But there are things every investor needs to know about this revolutionary company. The Motley Fool's newest premium research report shows that there's a lot more to Facebook than meets the eye. Read up on whether there is anything to "like" about it today to determine if Facebook deserves a place in your portfolio. Access your report by clicking here.

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Daniel Sparks

Daniel Sparks is a senior technology specialist at The Motley Fool. Follow him on Twitter to get links to his articles, quotes from books he reads, and a look at the sources that inspire him.

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10/9/2015 4:00 PM
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