Facebook has a small problem that's looming large. With social increasingly going mobile, smartphone screens are just too tiny to pack much advertising.
In reporting second quarter results last week, Facebook officials noted that it had 955 million monthly active users, up 29 percent from the same period a year before. But its mobile user base is driving the growth with some 543 million accessing Facebook from a mobile device on a monthly basis, up 67 percent from the same quarter last year.
The problem with the rapid shift of Facebook users from desktop and laptop computers to smartphones is that Facebook hasn't figured how to monetize mobile access. Display ads that sit on the side of a screen on a PC are seen as too intrusive on small mobile screens that tend to be much more personal devices than PCs. Other sites are facing similar challenges.
Facebook only recently began to offer limited advertising on its mobile platform. Some success is being found with Sponsored Stories, which is an ad in the user's News Feed section that alerts the user that a friend "likes" the advertiser.
"This is an encouraging start in our effort to generate revenue from the mobile use of Facebook," CEO Mark Zuckerberg said on a conference call with analysts. "We know that social ads perform much better than nonsocial ads, so our job over the next few years is to increase the percentage of ads that are social and engaging."
But some analysts feel mobile users would eventually filter out all such display ads. Others were disappointed that Facebook said on the call that it wasn't planning to come out with its own phone like Google and Apple with a goal of controlling the whole mobile experience. Instead, Facebook has been acquiring app-related companies — Instagram and Acrylic Software — and investing heavily on building a platform on top of which new apps can be built.
An article written by the Treffis Team for Forbes said Facebook could position itself to become the "default platform" for web developers looking to reach its growing minion of users.
"By providing the platform and reach, it can then monetize those apps by also offering advertising solutions and enabling payments for their developers," the piece said.
But many articles stated that Facebook's' biggest opportunity is capitalizing on access to its users' social preferences to support highly-targeted ads at individuals. Several lamented that Facebook had yet to even develop a location-based offering.
Management is apparently taking pains to not disturb the Facebook experience anywhere. Mr. Zuckerberg said more ads will be introduced into the mobile app and site "slowly," and the company would continue to "test and measure everything in the system on News Feed."
- Facebook shares down on lack of financial outlook - Reuters
- Mobile is the epicentre of Facebook's future - Marketing Week
- Facebook's weak spot is mobile - NBC News
- Facebook Says Mobile Ads Successful, but Analysts Say Challenges Remain - PC World
- Facebook's Not the Only One Struggling With Mobile Advertising - Mashable
- Facebook's stock plunge highlights fears about future growth - USA Today
- 5 Takeaways From the Facebook Earnings Call - The New York Times
- Facebook Struggles With Monetizing Its Mobile Users - Forbes