By Alexei Oreskovic
SAN FRANCISCO (Reuters) - Facebook Inc <FB.O> is expanding the advertising system that lets marketers tailor messages to users of the No. 1 social network based on their browsing history, in the company's latest step to refine its ad business.
So far, the system has been used to target graphical display ads on the right side of a Facebook user's page, based on websites visited in the past, such as for products or potential vacation destinations.
The move announced on Tuesday will incorporate this system, called Facebook Exchange, to the ads in Facebook's News Feed.
It ties together two of the most significant innovations that Facebook Inc has made in the past year to its advertising business, which accounts for roughly 84 percent of the company's revenue.
Marketers last year welcomed the launch of Facebook Exchange as it provided a common online advertising technique long missing on the social network.
Ads that appear directly within the Facebook News Feed are considered crucial to its future business prospects since they can be seen on mobile devices such as smartphones. About two-thirds of Facebook users accessed the site on a mobile device in December.
Facebook said the Facebook Exchange system will initially be available for newsfeed ads that appear on desktop PCs but not on mobile devices.
"Desktop is more in line with what FBX (Facebook Exchange) has been doing effectively in the right hand side. And we also find that desktop is the place where more people convert from seeing direct-response ads," said Facebook spokeswoman Elisabeth Diana.
The company is testing the new service with a limited set of partners, with plans for broader availability in the coming weeks.
Shares of Facebook closed 7 cents higher at $25.21 on Nasdaq.
(Reporting by Alexei Oreskovic; Editing by Richard Chang)