Musings on Facebook’s Mobile Future
September 5, 2012
Having a proven mobile monetization strategy would certainly help Facebook allay concerns about its ability to generate revenue from its massive user base, particularly given the rapid adoption of its mobile site and apps. Yet what many anxious observers overlook when assessing Facebook’s average revenue per useris the relatively brief history of the company’s efforts to make money on mobile to date.
When Facebook initially turned on the spigot of mobile ads in February, it instantly became the largest mobile advertising network – and perhaps the only to bridge the gap between user activity on desktop and mobile while permitting precise targeting of advertisements on granular demographic and psychographic parameters. Facebook began allowing advertisers to promote sponsored stories with mobile-only placement as of June.
Mobile remains a meaningful – and relatively untapped, from a monetization standpoint – opportunity for Facebook. Here’s why:
- Out of 955 million total monthly active Facebook users at the end of June, 543 million monthly active users used Facebook mobile products.
- 102 million users accessed Facebook only via mobile devices in June. That’s a 23% increase from March.
- In the U.S., users who access Facebook through both mobile and desktop now spend more time doing so via mobile (7.3 hours per month on mobile versus 6.5 hours on the web site, according to comScore data from March).
- This year, nearly70 million people in the U.S. will access Facebook from their mobile phones at least monthly. That’s 85.4% of the total domestic mobile social networking population.
- In emerging markets, users are expected to predominantly access Facebook via their mobile devices due to a lack of alternative access to the Internet. Multinational corporations looking to grow in those locales will rely on mobile advertising on Facebook as a primary mechanism to connect with their target audiences.
So far, Facebook has just dipped its toes into the proverbial waters of mobile advertising.
In order to monetize its mobile usage, Facebook began placing sponsored stories directly into users’ mobile news feeds. Rather than feature traditional banner or display ads that clutter precious mobile screen real estate, users may see stories regarding friends’ activity or content from pages they have liked that are being amplified via paid advertising. The frequency with which Facebook serves these sponsored ad units (sponsored stories and page posts) is limited to avoid detracting from the user experience, but as Facebook users adopt its mobile products at an increasing rate, its daily active users’ figure may grow faster than the number of ads it delivers.
Roughly half of the revenue from sponsored stories, which are generating an estimated annual run-rate of $365 million, is from mobile placements.
Ampush has seen very promising results at this early stage, pointing to tremendous opportunity for engagement and monetization via mobile advertising. Aggregated data from recent campaigns indicates mobile-only CTRs as much as 2x higher than those for identical sponsored stories served on desktop-only placements, and a CTR increase of over 8x when compared to all desktop ad types. Page posts tend to perform particularly well on engagement metrics. Facebook earns its highest eCPM (in their eyes, revenue per impression) from mobile-only advertising and therefore monetizes very efficiently.
Facebook is also testing serving sponsored page posts to people who are not fans of the originating brand page in both the desktop and mobile news feeds. This is a striking departure from Facebook’s tradition of requiring social context for a user to be eligible to receive content promoted by a page in his/her news feed. However, it should allow businesses to connect with new users more easily and remove a limitation on the reach for a page’s potential advertising content.
App developers in particular stand to benefit by leveraging Facebook’s current, upcoming, and potential mobile ad products.
In July alone, Facebook referred users to Apple’s App Store and Google Play more than 170 million times. Facebook can play a major role for mobile apps both as a source of traffic and via paid advertising opportunities that leverage data around users’ engagement, propensity to install, and credit-spend activity. To this end, Facebook is currently testing mobile app ad units. Unlike sponsored stories, these do not require any social activity, and they can be targeted to any users on eligible mobile devices based on their demographic and psychographic attributes. If successful, these ad units could be an effective mechanism for game launches and an ongoing driver of potentially high-LTV users for apps.
Local businesses and retail also have a lot to gain from potential mobile advertising functionality. User experience around ads that leverage location-based data for real-time offers with targeted, time-sensitive ad content could enable Facebook to drive offline consumer behavior and/or capitalize on the long tail of SMB and local advertising.
Given the nascent state of mobile advertising on Facebook, some limitations are to be expected…for now.
Currently, there is no option to generate previews of how stories will be rendered to users as mobile ads. Though they should resemble the same ad unit and content that would be displayed via desktop placement, no mobile preview option is available. Given the inability to replicate the user experience, uncertainties around the user flow may hinder adoption of mobile ad products.
Another striking constraint (with the exception of the mobile app ads beta, for which ads are exclusively served to iPhone or Android users) is the lack of device-specific placement capabilities for mobile ads. Selecting mobile-only as the placement option for an ad does not enable an advertiser to select the type of device they want to target. In other words, an advertiser cannot ensure that only users on, say, Android devices can be served their ads. Advertisers can use broad-category targeting capabilities (e.g., Mobile > Android), but it will not guarantee that the ad is only served to users currently accessing Facebook on Android devices. It only purports to target users who are “connected to” Android, and due to the inherently social nature of mobile sponsored stories, friends of the selected users on mobile devices or tablets may also be served this ad.
To monetize mobile effectively, Facebook will need to rely on more than pumping sponsored stories into users’ news feeds at the optimal frequency. Whether that entails driving installs and facilitating payments for app developers or leveraging location-based data for local and retail, there is no shortage of opportunity at Facebook’s disposal. However dire the stock price may seem, it’s worth remembering that we’re only in the first inning of this ballgame. As the intensity and scope of its efforts increase, it appears to be a matter of when, not if, Facebook will crack mobile advertising on an unprecedented scale.
This article was originally published on Fbppc.com.