Great to see Facebook succeeding on mobile

By October 24, 2012Facebook, Mobile

As you may have seen Facebook announced their Q3 results yesterday, revealing 14% of their ad revenues came from mobile. This was ahead of analysts expectations and helped drive their shares 13% higher in after hours trading.

Since the advent of the web it has been harder to make money out of publishing. A few have succeeded with novel cost and revenue models (Huff Post and Techcrunch spring to mind) but many have struggled because banner ads don’t pay much and startups took away big revenue streams like recruitment and classifieds that were no longer tied to content by physical distribution. It is often said that analogue dollars have been traded for digital pennies.

The rapid rise of mobile over the last year has exacerbated the problem. Small screens on smartphones don’t leave much space for adverts and everyone has been wondering how much worse it will become for publishers to generate revenues. People interested in this debate have focused their attention on Facebook because it is the world’s biggest publisher and because its customers are rapidly transitioning to mobile. The fact that the shares bounced 13% on the back of good mobile news in an otherwise solid but not inspiring set of results shows how worried investors were about this issue.

Facebook’s success in monetising mobile is good news for publishers everywhere, who will now be more confident they can repeat the trick on their own properties. It’s not all cookies and ice cream though. It is early days, but Facebook is monetising mobile at less than half the rate of computers (mobile is 33% of traffic but generates only 14% of ad revenues).

I expect that the potential for monetising mobile will improve going forward, for Facebook and for other publishers. There is some talk that there are too many ads on Facebook’s mobile apps, and that as many of 50% of clicks on mobile ads are accidents, but experimentation with new ad formats and improvements in targeting to improve yields, and the natural uplift in effectiveness as it becomes easier to transact ecommerce on mobile will more than compensate and keep the sector moving forwards at a rapid pace.

  • I was talking with a major newspaper group last week who have app users in the tens of millions. That sounds good, but it’s actually bad. Monetization is challenging on desktop, and negligible on mobile apps. They maintain that accidents are the #1 reason users click on an ad. In their lingo “fat fingers” is how they make money.

    The nature of mobile advertising will be different. More personal, relevant and action oriented. Knowing the user, and engaging them. I like Larry’s summation from this NYTimes article of yesterday.

    “We’re really starting to live in a new reality, one where the ubiquity of screens really helps users move from intent to action much faster and more seamlessly,” Larry Page, Google’s chief executive, told analysts last week. “It will create new opportunity in advertising.”

  • Thanks Barry. Page’s point is the exciting one – when people can move seamlessly from thinking they want to buy something to buying it on their cellphone – intent to action – clicking to buying – then the value of mobile ads will soar.

  • Good news it is. I think as location-based advertising on mobiles grows – and as it navigate annoyance-to-users scenarios – we will move forward with the general theme of ads and relevance meeting and merging…ads as helpful advisors.

  • The old ‘advertising as content’ aspiration. I hope so, at least for a decent proportion of ads shown.