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Facebook Inc. and IBM Partner to Make Ads Even More Personal

By Adam Levy – May 11, 2015 at 7:01PM

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IBM's Cloud Marketing business is teaming up with Facebook to target ads on the social platform.

The new partnership is heavily focused on retail shoppers. Source: IBM.

While Facebook (META 0.69%) has been investing heavily in artificial intelligence, a recently announced new partnership will give its advertisers access to some of the best AI in the world. IBM (IBM 0.37%) is partnering with Facebook to help big companies personalize their marketing toward Facebook users.

The partnership will focus heavily on retailers, which can combine IBM's data on purchase history and items viewed as well as location and weather data with Facebook's user data, to target their ads. Facebook is hoping to show that its advertisements don't just provide clicks, but actual sales.

This is yet another step for Facebook in its efforts to court retailers, and it's another big partnership for IBM, which has made several notable ones in the last year with Twitter (TWTR 0.37%), Tencent, Apple, and other tech companies with loads of data.

How is this partnership different than Twitter's?
IBM tapped Twitter earlier this year to help it develop an app for businesses that helps them better understand their customers. Twitter is licensing its data to IBM to help make the tool functional, and that revenue falls under Twitter's data licensing revenue. While many of the businesses that might use Twitter and IBM's new app also advertise on Twitter's platform, there's no advertising aspect to the analytics tool they developed together.

It's interesting that IBM is willing to partner with Facebook for its IBM Commerce advertising division, but when working with Twitter, it chose not to do the same. Perhaps that speaks to the value of Facebook's practically ubiquitous user base as well as its existing targeting capabilities. IBM's press release on the Facebook partnership said Facebook was the first company to join the new IBM Commerce THINKLab, which puts companies together with brands to "accelerate development of new technologies designed to personalize customer experiences."

The big brands IBM works with are often most interested in reach. So, if they're going to start making "personalized" advertisements at scale, they want the biggest bang for their buck, and Facebook can deliver it. Twitter, with just 65 million users in the U.S., cannot provide the same scale as Facebook's 210 million users across the U.S. and Canada.

On the other hand, the largest portion of Twitter's advertising revenue comes from brand advertisers. However, there's evidence from the company's most recent earnings results that indicates it's having trouble retaining spending from those big brands.

Facebook continues to push into retail
The partnership with IBM will strengthen Facebook's pitch to big retailers to advertise on its platform. The company has been pushing toward more retail advertisements in the past year or so.

It rolled out its Atlas demand-side platform, which allows ad buyers to track ad impressions across multiple devices and track in-store sales conversions. Additionally, Facebook has rolled out several new ad units, including "product ads," which allow advertisers to display multiple items and use retargeting data to show products viewers saw but chose not to purchase.

Facebook has also been testing a buy button in ads, which would allow users to purchase items directly from Facebook without leaving or providing their credit card information to yet another retailer. And most recently, the company introduced Businesses on Messenger, which aims to connect businesses with Facebook users directly through its messaging app. At the same time, Facebook announced it would start rolling out payments for Messenger, which could translate into transactions between businesses and users.

With the addition of IBM's marketing cloud capabilities and its customer base, Facebook may attract even more ad spend from some of the most valuable advertisers.

IBM gains another valuable cloud partner
As mentioned, IBM has been making lots of deals with tech companies to improve its cloud business as its traditional business shrinks. Last quarter, IBM's cloud revenue increased 75% year over year, while its other revenue sources all declined. Adding Facebook as a partner gives its cloud platform even more data to use and become smarter.

Facebook will join IBM's new advertising R&D think tank -- IBM Commerce THINKLab -- where researchers, designers, and marketing experts help businesses craft campaigns. Additionally, companies working with IBM Commerce will be able to take what works on Facebook and extend those campaigns across the web and to other apps.

As IBM transitions to more cloud services, its partnerships with Facebook and Twitter, among others, should help it beat out the competition. Meanwhile, Facebook receives the benefit of IBM's cloud marketing capabilities, something Twitter didn't tap into. As such, we may see more brand advertisers shift ad dollars from Twitter to Facebook, or from TV to Facebook.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, International Business Machines, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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