Facebook’s Small Mobile Challenge

Discussion
Aug 02, 2012

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."

Discussion Questions: How should Facebook explore monetizing its mobile efforts? What will this mean for retailers and brands creating ads for Facebook’s mobile platform?

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11 Comments on "Facebook’s Small Mobile Challenge"


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Jason Goldberg
Guest
9 years 9 months ago

The smaller screens do force advertisers and UX designers to curate their content, but it generally means whatever ads and content make it to the screen have less competition in the visual hierarchy than content on bigger screens. Google sees click-through rates on tablets 31% higher and 72% higher on smartphones. The challenge is monetizing those clicks on mobile devices seems to be much harder (consumers don’t tend to complete e-commerce transactions on smartphones).

So the calls to action tend to be different: Click to Call, Get Directions to Store, etc….and the ad industry hasn’t figured out how to do cross-channel attribution very well, to get credit for those types of conversions.

That being said, there is less mobile advertising inventory, so Facebook has to get higher CTR and be able to charge more for the ads, and of course Facebook struggles to deliver a good consumer experience on mobile across the board even though Americans spend more time on Facebook Mobile, than they do on Facebook’s desktop website.

Ben Ball
Guest
9 years 9 months ago

Facebook is not the only social media company with this problem. And Zuckerberg is smart to take it slow after some earlier gaffes upset the user base. The key thing is that Facebook continues to acquire new users at a rapid clip. Monetizing the small screen will come. One idea: contracting with wireless carriers to receive a small portion of the service feel allocated to Facebook driven usage. Set it up like the cable and dish TV network model and let the access service provider collect the revenue for you.

Gordon Arnold
Guest
9 years 9 months ago

The only sure part of retail is the consumer. The consumer has and will continue to outlive all forms of advertising. Therefore it is imperative to go where the consumer goes (at the present time) in order to invite them to use your products and services.

Today’s communication means and devices will be tomorrow’s landfill issue. Like, where all the mini computers and beepers now live. Building your own IT infrastructure and and updating it to perform to consumer preferences will help to provide stability in marketing efforts. Gambling on any one method of communication will produce more losers than winners and a short life to the winners. Facebook appears to be investing in their own IT capabilities and investing in the things they need for optimum performance. Staying away from hardware is a good idea for them. This way they can continue to evolve with industry trends and changes.

Roger Saunders
Guest
9 years 9 months ago

Facebook, and other marketers committed to finding a solution to messaging on smartphones, will benefit from following the smartphone video platforms that we’re seeing overseas. Europe and Asia are well-ahead on making use of this media form.

Finding a way to work with U.S. telecom carriers will represent a key challenge in working through this issue. Consumers, in their never-ending interest in seeking entertainment, are willing and interested in viewing effective, short video messaging.

Carlos Arámbula
Guest
9 years 9 months ago

As a pioneer, this will not be the last challenge Facebook will face; many more “firsts” are in the horizon. Facebook was deliberate in its approach to advertising the first time and it should continue to be so when it comes to mobile advertising.

Not all retailers and brands lend themselves to mobile advertising. Advertisers need to address this issue as promotional media vehicle (does it make sense to be part of the media mix?). I don’t believe it should be any more complicated than that.

Malcolm Faulds
Guest
Malcolm Faulds
9 years 9 months ago

I don’t see this as too big a deal. Facebook is already seeing dramatically higher click rates on mobile ads and is able to charge 10X the CPM for them. If the interaction remains high and they continue to improve targeting and campaign optimization capabilities, I think Facebook will be in great shape.

Camille P. Schuster, Ph.D.
Guest
9 years 9 months ago

Generating revenue from the experience has been and will continue to be a challenge for Facebook regardless of the format. The initial premise of Facebook was as a way for friends to connect not as a way for friends to connect with advertising. Determining how and where to monetize the experience is a challenge regardless of the media used.

James Tenser
Guest
9 years 9 months ago

Mobile ads? Psshaw! Facebook needs to be much more groundbreaking if it wants to monetize successfully.

Its potential for ad exposures on any platform is trivial compared with huge flows of data generated by Facebook users as they navigate, post content, and interact. This is the definition of Big Data. If you don’t get it yet, do some Web searching on Facebook’s use of “Hadoop” and read up.

If Facebook succeeds at getting its act together and starts selling advanced insights to marketers, the taps will open and cash will flow.

Kenneth Leung
Guest
9 years 9 months ago

Small but slow is critical when you are dealing with a personal social platform like Facebook. User interface is a quirky thing and people can migrate suddenly in droves off platforms if the experience changes too much too fast (Digg being the example). It is better to add applications with retail/commerce functionality and entice facebook users on it rather than drastically change the UI on the mobile in the name of monetizing commerce.

Kai Clarke
Guest
9 years 9 months ago

This is a classic issue of one solution not being a good fit for another solution (mobile advertising) in the current model. Facebook needs to discount its current mobile model and recognize that it has to change its model to remain competitive and profitable. Once this is done, they can start to modify their model to embrace a mobile platform. Considering even a new model would be one of their solutions….

Ben Sprecher
Guest
Ben Sprecher
9 years 9 months ago

Facebook has an opportunity here to redefine what it means for something to be an “ad.”

Imagine that you are checking Facebook while standing on a street corner at lunch time, and it tells you that three of your friends like the cafe two doors down (and one of them was there this morning), and that if you go in right now and check in, you can save $1 on a sandwich. That is a totally different beast than most mobile ads today. It incorporates the user’s social connections, location, time of day, and knowledge that they are out and about to deliver a highly relevant, *context-sensitive* message with an immediate benefit for the user.

The smartphone platform puts all the pieces in place for this type of interaction today. Facebook’s success with mobile monetization will be driven by how quickly they can make this type of mobile ad a reality.

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