Last night, Kristen Nicole pointed out a new advertising system on Facebook that enables you to display ads on the side of Facebook applications. The only problem with these ads is that they go right where Facebook’s existing flyer ads are displayed. Doesn’t this violate Facebook’s terms of services? If it doesn’t I’m sure Facebook will quickly revise their terms to prohibit the placement of ads within existing Facebook ad placement locations. So far, the Flyer Exchange has provided less than 2000 clicks in total to advertisers and honestly I don’t see them getting much further. So how does Flyer Exchange work?

Currently, Flyer Exchange works on a point based system. You can pay for points or you can earn points by placing flyers on your existing application. You then earn 1 point for each unique user that clicks your flyer. You can then place your own flyers to advertise your own website or application and are charged 1 point for each click. The current cash value of points earned from clicks are $0.20 and the current cost of of points is $0.10. You may see this as an arbitrage opportunity (as I did), but unfortunately it is not. The current cash out rate of $0.20 is a promotion. To prevent users from cashing out points at a price higher than they can buy them, users who buy points this week won’t be allowed to cash out until next Friday October 5th.

For those of you that are looking for another advertising channel or monetization source on Facebook, go grab the Flyer Exchange application while it lasts. I don’t see this one sticking around for too long.