That Facebook (FB) has a ton of data about its 1.79 billion monthly active users that it can use for advanced ad targeting is pretty common knowledge at this point. What perhaps gets less attention is how creative and enterprising Facebook has become at using this data, including on sites and apps the company doesn't own.
Bloomberg reported on Thursday that Facebook has begun running video ad tests that involve content shown on Roku and Apple TV set-tops. Notably, the ads are targeted to users based on the Facebook profiles linked to the IP address used by a given set-top. A&E Network, broadcaster of shows such as The Killing Season and Duck Dynasty, is among the content owners taking part in the trial.
Admittedly, this is an imperfect approach to targeting. There could be multiple Facebook users residing in the same home, and thus relying on the same IP address to get online. That could result in, say, the spouse or roommate of someone Facebook knows to be an NFL fan getting a Madden 17 ad. And as Bloomberg notes, Facebook's main priority remains helping advertisers run successful campaigns on the company's own site and apps.
Nonetheless, imperfect targeting is better than no targeting. And this is hardly Facebook's only video ad foray involving non-Facebook properties.
In May, the company announced it will start selling in-stream and in-article video ads on sites and apps owned by Mashable, Daily Mail, USA Today and others. Much like the ones in the set-top test, the ads on partner sites are targeted based on the audience an advertiser is trying to reach, rather than the content they're being run against.
And since 2014, Facebook has been showing a variety of ads through its Audience Network, which relies on Facebook user data to run ads on third-party apps and mobile sites.
Though facing serious competition from Alphabet's (GOOGL) AdMob unit, the Audience Network's targeting abilities, measurement tools and strong native ad support have made it popular with developers. The network was said to be on a $1 billion revenue run rate as of late 2015; Facebook typically gets a 30% cut on ad sales.
A large portion of Audience Network sales have involved direct-response ads, which try to get a user to do something like buy a product, sign up for a newsletter or (most often) download an app. The video ad service launched in May, by contrast, is focused on brand advertising.
COO Sheryl Sandberg has gone to great lengths on several earnings calls to highlight the success video brand advertisers have had on Facebook -- Procter & Gamble and Nestle were mentioned on the October call -- aided by Facebook's efforts to help marketers tailor video ads for mobile news feeds and target users likely to be interested in a particular product or service.
Brand ad targeting is a big reason why Alphabet's Google, for all its search and display ad success, has been hungry to get its hands on better "social" data on its users; just see the various steps and missteps taken with Google+ over the last five years.
Google Search is still unmatched when it comes to delivering ads related to what a consumer is interested in at a particular moment. If a 30-year-old single male is looking to buy a birthday gift for his two-year-old niece, Google can send relevant ads based on what he's searching for. Whereas Facebook would likely have a very hard time figuring it out based on the user's profile data and likes.
Meanwhile, Google, Facebook, Amazon (AMZN) and some independent ad tech firms like Criteo (CRTO) have all had success delivering targeted e-commerce ads that are based on a user's recent browsing activity.
But for brand advertising, and perhaps also advertising for goods and services that a user might be interested in buying down the line, there's arguably no substitute for all the data Facebook's users willingly provide the company while spending an average of 50 minutes per day on its site and apps.
All of that data, together with the superb execution of Facebook's ad teams, leaves the company well-positioned to grow its share of a display ad market estimated by research firm eMarketer to be worth $32.17 billion in the U.S. alone this year.
Facebook already has a big chunk of this market via ads sold on its own sites and apps -- analysts expect the company to produce over $27 billion in revenue this year, and over 45% of that will likely come via North American ad sales.
But that still leaves a lot of money being directed towards third-party properties. And while there's plenty of competition here that won't be going away, Facebook appears to be just scratching the surface of what its data can let the company accomplish in this market.